Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

PRIVATE BUSINESS

INTERNATIONAL WESTMINSTER BANK BILL (By Order)

ISLE OF WIGHT BILL (By Order)

ST. GEORGE'S HILL, WEYBRIDGE, ESTATE BILL (By Order)

HYTHE MARINA VILLAGE (SOUTHAMPTON)

WAVESCREEN BILL (By Order)

NEW SOUTHGATE CEMETERY AND CREMATORIUM LIMITED BILL (By Order)

Orders read for consideration of Lords amendments.

To be considered on Thursday 2 November.

CITY OF LONDON (SPITALFIELDS MARKET) BILL (By Order)

Order read for consideration of Lords amendments.

To be considered on Tuesday 31 October.

ASSOCIATED BRITISH PORTS (No. 2) BILL (By Order)

Order read for resuming adjourned debate on Question—[23 May]—That the Bill be now read the Third time.

Debate to be resumed on Thursday 2 November.

BRITISH RAILWAYS (PENALTY FARES) BILL [Lords] (By Order)

Order for further consideration, as amended, read.

To be further considered on Thursday 2 November.

BUCKINGHAMSHIRE COUNTY COUNCIL BILL [Lords] (By Order)

LONDON LOCAL AUTHORITIES BILL [Lords] (By Order)

LONDON REGIONAL TRANSPORT (PENALTY FARES) BILL [Lords] (By Order)

BRITISH RAILWAYS BILL (By Order)

BROMLEY LONDON BOROUGH COUNCIL (CRYSTAL PALACE) BILL (By Order)

BIRMINGHAM CITY COUNCIL (No. 2) BILL (By Order)

Orders for consideration, as amended, read.

To be considered on Thursday 2 November.

CITY OF LONDON (VARIOUS POWERS) BILL (By Order)

Order for consideration, as amended, read.

To be considered on Tuesday 31 October.

VALE OF GLAMORGAN (BARRY HARBOUR) BILL [Lords] (By Order)

CARDIFF BAY BARRAGE BILL [Lords] (By Order)

Orders for Second Reading read.

To be read a Second time on Thursday 2 November.

MEDWAY TUNNEL BILL [Lords] (By Order)

Order. for Second Reading read.

To be read a Second time on Tuesday 31 October.

ASSOCIATED BRITISH PORTS (No. 2) BILL

Motion made,
That the Promoters of the Associated British Ports (No. 2) Bill shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office not later than the day before the close of the present Session of their intention to suspend further proceedings and that all Fees due on the Bill up to that date be paid;
That on the fifth day on which the House sits in the next Session the Bill shall be presented to the House;
That there shall be deposited with the Bill a declaration signed by the Agents for the Bill, stating that the Bill is the same, in every respect, as the Bill at the last stage of its proceedings in this House in the present Session;
That the Bill shall be laid upon the Table of the House by one of the Clerks in the Private Bill Office on the next meeting of the House after the day on which the Bill has been presented and, when so laid, shall be read the first and second time (and shall be recorded in the Journal of this House as having been so read) and shall be ordered to be read the third time;
That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session.
That these Orders be Standing Orders of the House.—[Mr. Harold Walker.]

Hon. Members: Object.

To be considered on Wednesday 1 November at Seven o'clock.

CARDIFF BAY BARRAGE BILL (LORDS)

Motion made,
That the Promoters of the Cardiff Bay Barrage Bill [Lords] shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office of their intention to suspend further proceedings not later than the day before the close of the present Session and that all Fees due on the Bill up to that date be paid;
That if the Bill is brought from the Lords in the next Session, the Agents for the Bill shall deposit in the Private Bill Office a declaration signed by them, stating that the Bill is the same, in every respect, as the Bill which was brought from the Lords in the present Session;
That as soon as a certificate by one of the Clerks in the Private Bill Office, that such a declaration has been so deposited, has been laid upon the Table of the House, the Bill shall be deemed to have been read the first and shall be ordered to be read a second time;
That the Petitions against the Bill presented in the present Session which stand referred to the Committee on the Bill shall stand referred to the Committee on the Bill in the next Session;
That no Petitioners shall be heard before the Committee on the Bill, unless their Petition has been presented within the time limited within the present Session or deposited pursuant to paragraph (b) of Standing Order 126 relating to Private Business;
That, in relation to the Bill, Standing Order 127 relating to Private Business shall have effect as if the words "under Standing Order 126 (Reference to committee of petitions against Bill)" were omitted;
That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session;
That these Orders be Standing Orders of the House.—[Mr. Harold Walker.]

Hon. Members: Object.

To be considered on Thursday 2 November.

BIRMINGHAM CITY COUNCIL (No. 2) BILL

Motion made,
That the Promoters of the Birmingham City Council (No. 2) Bill shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office not later


than the day before the close of the present Session of their intention to suspend further proceedings and that all Fees due on the Bill up to that date be paid;
That on the fifth day on which the House sits in the next Session the Bill shall be presented to the House;
That there shall be deposited with the Bill a declaration signed by the Agents for the Bill, stating that the Bill is the same, in every respect, as the Bill at the last stage of its proceedings in this House in the present Session;
That the Bill shall be laid upon the Table of the House by one of the Clerks in the Private Bill Office on the next meeting of the House after the day on which the Bill has been presented and, when so laid, shall be read the first and second time (and shall be recorded in the Journal of this House as having been so read) and, having been amended by the Committee in the present session, shall be ordered to lie upon the Table;
That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session;
That these Orders be Standing Orders of the House.—[Mr. Harold Walker.]

Hon. Members: Object.

To be considered on Thursday 2 November.

Oral Answers to Questions — HOME DEPARTMENT

Policing (Leicestershire)

Mr. Janner: To ask the Secretary of State for the Home Department whether he will make a statement concerning current policing levels in Leicestershire.

The Parliamentary Under-Secretary of State for the Home Department (Mr. Peter Lloyd): My right hon. Friend approved 27 extra police posts for Leicestershire constabulary this year, bringing to 54 the new posts approved under this Government. In addition, 130 police officers have been returned to operational duties as a result of civilianisation and other efficiency measures.
My right hon. Friend is able to approve a further 1,100 police posts covering provincial forces and the Metropolitan police for 1990–91. He will consider the Leicestershire police authority's application for a further 75 police posts in that year with advice from Her Majesty's inspectorate of constabulary along with applications received from other authorities. My right hon. Friend hopes to announce his decisions as soon as possible and before the end of the year.

Mr. Janner: I congratulate the Minister on his new appointment and I hope that he will start well by answering yes to my questions. Is he aware of the appallingly high level of crime in the city of Leicester, where violent crime has more than doubled since his party came to power? Is he aware that his predecessor saw fit to make no allocation whatever of additional police officers to Leicestershire in 1988, despite the chief constable's call for more, and last year granted only one third of those requested? Will the Minister now answer yes to my request for a firm assurance that he will listen properly to our chief constable and help us to keep crime off the streets by getting more police on them?

Mr. Lloyd: We always listen properly to Leicestershire's chief constable. I am sorry that the hon. and learned Gentleman, to whom I am grateful for his welcome, is so dismissive of the successes of the Leicestershire police. The crime rate in the county is well below the national average and the clear-up rate well above it. Last year total crime in the county fell, falling by 9·3 per cent. for sex offences and by 5·7 per cent. for burglaries. The force has an extra 130 officers because the chief constable also listened to the suggestions of the Home Office and found that he could replace 130 officers and free them to go back on the beat by recruiting civilian staff. The hon. and learned Gentleman is heavy on hyperbole but short on the salient facts.

Mr. Latham: I, too, warmly welcome my hon. Friend to his new position and wish him well in it. Is he aware that my rural constituents are pleased at the increasing emphasis being placed on rural policing by Chief Constable Hurst and Superintendent John Mousley who has just retired? That is a welcome development, but it will require still more resources. I hope that my hon. Friend will bear that in mind when he considers a new allocation of police.

Mr. Lloyd: Of course my right hon. Friend the Home Secretary will bear that in mind. He will also bear in mind that Leicestershire had additional police constables this year. He will listen carefully to my hon. Friend's suggestion that the county should have more next year.

Mr. Vaz: I join the demand by my two hon. Friends for additional police officers for the Leicestershire constabulary. The Minister should be aware that this week hon. Members representing Leicestershire constituencies received a report by the lesbian and gay organisations in Leicester showing that police officers were being regularly deployed inside public lavatories. Does the Minister agree that a better use of police officers in a constabulary that is under strength would be on the streets catching criminals rather than acting as agents provacateurs in public lavatories harassing people going about their lawful business?

Mr. Lloyd: I have not seen the report and I will not comment on it. Obviously, its content is a matter for the chief constable as an operational consideration and not for my right hon. Friend the Home Secretary or for me.

Crime Prevention

Mr. Thurnham: To ask the Secretay of State for the Home Department what further crime prevention initiatives he intends to introduce.

The Minister of State, Home Office (Mr. John Patten): In addition to the 11 safer cities projects which are now operating, a further five are planned to start between now and March 1990. Four new projects will be announced in the following financial year. We also launched yesterday the next phase of our national crime prevention advertising campaign which will provide further advice for the public on how they can help to reduce crime. Much excellent work is also being done with all-party support by the organisation Crime Concern.

Mr. Thurnham: I welcome my hon. Friend's excellent new campaign announced yesterday on practical ways to crack crime. It is essential to reduce violent crime. In that context, perhaps he could say more about what he thinks individuals could do. Does he agree that neighbourhood watch schemes are an excellent example of what people can do to help the police?

Mr. Patten: I thank my hon. Friend for his kind remarks. Much can be done to prevent crime. Many efforts have been concentrated thus far on the prevention of property-related crimes, domestic burglaries and related acts. We can helpfully use some of the techniques being developed in neighbourhood watch areas to try to begin to deal with the difficult task of preventing violent crime and sexual attacks on women.

Mr. Heffer: Would it not be best if the Government totally supported the police in having far more foot patrols in areas where there is a high level of crime? My mother-in-law, who is 84 years of age, recently had her home broken into. Luckily, she did not wake up; we do not know what would have happened to the old lady if she had woken up when those people broke in. She is a supporter of crime watch in that area. Is it not time that the Government recognised that the real answer is far more foot patrols by police doing what they used to do in the old

days and looking after our people? At present the Government engage in all sorts of propaganda but little real action.

Mr. Patten: The answer to the hon. Gentleman's question is that we have far more police. The hon. Gentleman is right when he says that we all want to see far more police on foot patrol. At the same time, modern policing with its speed of communications demands that there be people able to deploy others in the event of attacks on people or property. I was extremely sorry to hear of the unfortunate event affecting the hon. Gentleman's mother-in-law. On the next of my regular visits to Liverpool perhaps he will arrange for me to call on her to discuss these matters at first hand.

Dame Peggy Fenner: I was pleased to read in the press yesterday my hon. Friend's special night time guidance for women. He is clearly aware that women who walk out now do so in a climate of fear. In his new crime prevention activities, will he pay special attention to the special needs of women in this rather violent era?

Mr. Patten: I thank my hon. Friend for her welcome of our crime prevention publicity campaign. The giving of advice to women or men on how to conduct themselves is sensitive and I dare say that every bit of advice will not suit every person. However, it is critically important that every one of us does everything that he can to help to diminish the numbers of attacks on women and to promote women's safety.

Mr. Sheerman: Is the Minister aware that we shall not get safer cities and towns on the back of show business gimmicks and advertising campaigns? Will he look again at backing democratically elected local authorities such as Southwark, which initiated a new campaign yesterday, so that they can lead the way in a positive partnership between the local authority, police, private enterprise and the community? Will he stop starving local authorities and thus preventing them from doing that?

Mr. Patten: I hope that the hon. Gentleman is not confusing the giving of useful public information with glitzy advertising campaigns. We are trying to act with all-party support, and I was glad to see that spokespersons—one has to be even-handed when dealing with the Labour party—such as the hon. Member for Halifax (Mrs. Mahon) welcomed yesterday's campaign without any reservation. It is important that we have an information campaign and not an advertising campaign.
The hon. Gentleman is right to say that at the same time we need to mobilise local authorities, which have an important role to play in crime prevention. That is why we have already consulted the Association of Metropolitan Authorities, the Association of County Councils and the Association of District Councils in preparing a new crime prevention circular, which I hope will be widely welcomed. I hope that the hon. Gentleman does not think that crime prevention is a matter for party politics.

Criminal Justice Act 1988

Mr. French: To ask the Secretary of State for the Home Department whether he has any plans to review the workings of the Criminal Justice Act 1988.

Mr. John Patten: Criminal justice legislation is kept under constant review. The 1988 Act was a wide-ranging and substantial measure. As yet, it is naturally too early to judge the Act's effectiveness overall.

Mr. French: In reviewing the Act, will my hon. Friend consider extending the arrangement whereby children under 14 years of age can give evidence by closed circuit television from outside the courtroom? That arrangement is available in the higher courts but not yet available in the magistrates courts.

Mr. Patten: We are keeping this under review, and my right hon. Friend the Home Secretary will look at it when he considers further the report on this and related issues just received from his honour Judge Pigot, the Common Serjeant in the City of London.

Mr. Flynn: Does the Minister realise that, despite the effects of the 1988 Act, crimes of violence against the police in Gwent are still at a record level, and the Gwent police remain the most bruised and battered in Britain? What does he intend to do to increase the Gwent police force to the proper level that the chief constable demands? Will he have some talks with the magistrates to ensure that anybody convicted of crimes of violence against the police can look forward with certainty to a period behind bars?

Mr. Patten: I am happy to meet anyone from Gwent who wishes to come to see me to talk about these issues. There is an adequate range of penalties for those who attack police.

Mr. Favell: My hon. Friend will have heard of the tragic events in Stockport last Thursday, when a temporary member of the Stockport shooting centre tried to leave with a pistol. He shot dead another member and then shot dead someone nearby. [Interruption.] It is not funny.

Mr. Speaker: Order. We are making slow progress and this does not help.

Mr. Favell: I have no doubt that my hon. Friend will want to join me in expressing sympathy for the families of the two men who were shot dead, one of whom had acted extremely bravely. Will he consider ensuring that temporary members of shooting clubs are vetted by the police before they enter the premises to shoot? Secondly, will he ban the use of targets shaped like human beings, which I understand to be illegal in West Germany?

Mr. Patten: My right hon. Friend the Home Secretary and I extend our deepest sympathies to the relatives of those who were killed. My right hon. Friend is looking closely at the serious issue of temporary membership of gun clubs. The International Shooting Union has, from 1 January this year, laid down standards for target shooting which involve circular black targets. These are the targets that should be used in gun clubs, rather than those purporting to represent human beings. I hope that we never see those again.

Mr. Hattersley: The Minister will know from the public reaction to the wrongful arrest and conviction of the men and women involved in the Woolwich and Guildford affair that there is a growing national demand for a change in the law to prevent suspicion being converted into conviction of men and women who make confessions which are not substantiated by any other sort of evidence. Can we be told

whether the Government intend to give the House an opportunity to come to a judgment on this matter next year?

Mr. Patten: The right hon. Gentleman will be aware of the public inquiry which has been set up. As soon as that inquiry has reported and its contents have been made known to the House, the House will doubtless wish to express its views.

Mr. Jessel: As we now have nine months' experience of the abolition of peremptory jury challenges, can my hon. Friend say how it has worked out?

Mr. Patten: It seems to be working exceptionally well, like the rest of the Act from which it stems.

West Midlands Police (Investigation)

Dr. Reid: To ask the Secretary of State for the Home Department if he will call for a report from the chief constable of the West Midlands as to on how many occasions since 1979 persons in the custody of the West Midlands police have confessed to crimes of which they were subsequently acquitted or on which charges were subsequently dropped.

Mr. Fisher: To ask the Secretary of State for the Home Department when he last met the chief constable of the West Midlands; and what matters were discussed.

Mrs. Mahon: To ask the Secretary of State for the Home Department if, in the light of the recent decision to disband the West Midlands serious crimes squad, he will review all convictions for serious crimes based wholly or mainly on confessions obtained from people in the custody of the West Midlands police.

The Secretary of State for the Home Department (Mr. Douglas Hurd): The information requested about the number of confessions of people held in the custody of the West Midlands police since 1979 is not readily available. In 1988 alone, the West Midlands police prosecuted more than 32,000 people for criminal offences, most of whom would have spent some time in custody.
I last met the chief constable of the West Midlands on 5 September, when we discussed a number of policing matters.
The assistant chief constable of West Yorkshire, Mr. Donald Shaw, was appointed on 14 August to carry out an investigation into the work and practices of the West Midlands serious crime squad, under the supervision of the Police Complaints Authority. His inquiries will concentrate on the period since the beginning of 1986, when complaints about the squad started to emerge. As I said in answer to a question by the hon. Member for Sunderland, South (Mr. Mullin) when making my statement last Thursday at column 283, if anything arises from the investigation which causes doubt about the safety of any conviction I would have to consider whether intervention on my part would be justified.

Dr. Reid: The Home Secretary has said that the inquiry will cover two years. Is not the stark truth that the rot in the West Midlands serious crime squad goes back as far as the inquiry into the Birmingham pub bombings? I ask the right hon. Gentleman to face that fact sooner rather than later. Eventually he or one of his successors will have to do that in the same manner as it was done over the Guildford


Four. I ask him for the sake of police morale, humanity and the good name of British justice to order an urgent and thorough inquiry into all the circumstances surrounding the arrest, conviction and incarceration of six men for the Birmingham pub bombings, whom many of us on both sides of the House believe to be wholly innocent of the charges laid against them.

Mr. Hurd: Mr. Shaw's investigation will concentrate on the cases that gave rise to it. I say for the third time that if the investigation reveals a line of inquiry that leads further into the past I would expect the police to follow it up. The point that the hon. Member for Motherwell, South (Dr. Reid) has omitted is that I did act in the same way in the two cases although at a year's distance. In January 1987, I referred the Birmingham case to the Court of Appeal. There then followed a rigorous police investigation by the Devon and Cornwall police which was comparable with the one that the Avon and Somerset police undertook for the Guildford case. After that investigation, the Court of Appeal spent a month hearing the case again. That hearing took place at the end of 1987. The Court of Appeal came to the conclusion, on the information available to it and after the police inquiry, that the convictions were sound.

Mr Fisher: Will the Home Secretary not reconsider what he has just told the House? Did he not read the report in The Guardian yesterday that one of the officers concerned saw that the Birmingham Six were beaten up? Does not that indicate that there is new evidence available to Mr. Shaw and that unless the Home Secretary requires Mr. Shaw specifically to examine all the circumstances surrounding the Birmingham Six, there is a real danger of another miscarriage of justice taking place?

Mr. Hurd: The circumstances surrounding the confessions in the Birmingham pub case, including the question of violence, were considered in the Court of Appeal review at the end of 1987. It took account of all those points. If there are new points, they are matters that must be considered—but nothing that I have so far heard or seen goes beyond material that was available in the very long and thorough rediscussion in the Court of Appeal. It resulted in a reaffirmation of the original verdict being given at the beginning of 1988.

Mrs. Mahon: Is not the Home Secretary aware that three of the officers currently under investigation for fabricating confessions were involved in obtaining confessions out of the Birmingham Six? The fourth, detective sergeant Brian Norton, has served time in gaol for obtaining confessions on that basis. Should not the right hon. Gentleman follow that line of inquiry?

Mr. Hurd: I understand that one member of the serious crime squad, which was disbanded in the summer, was involved in the investigation into the Birmingham pub bombing. That is to say, his period of service in the serious crime squad spanned those years.
The chief constable of the West Midlands set up the investigation by Mr. Shaw because of complaints and doubts about a certain number of recent cases. As the hon. Lady knows, certain procedures and papers were criticised, were not in the right order or were missing altogether. That was the purpose of the inquiry, and it is on that that it is concentrating.
If that investigation were to lead back, by any means, to an earlier period or to the sorts of confessions to which the hon. Lady referred—I am not talking only about the Birmingham pub case—and any convictions were called into question, we would have to reconsider them. However, that is not the current position.

Mr. Stanbrook: Although my right hon. Friend could not give a total figure relevant to the question, is it not clear to anyone who has studied these matters, and therefore only fair to say so, that the number of cases of defective evidence relating to confessions is infinitesimal compared with the total?

Mr. Hurd: Of course that is true. It is also true that since the Birmingham, Guildford and Woolwich cases the Police and Criminal Evidence Act has completely changed the framework and the circumstances——

Mr. Hattersley: Except for terrorism.

Mr. Hurd: No, including terrorist suspects, except in the case of tape recording. The Act has changed the framework and the way in which the police have to conduct their proceedings.

Mr. Anthony Coombs: In the interests of the confidence and morale of the vast majority of good police officers in the west midlands, will my right hon. Friend confirm that whatever the activities of certain individual members of the serious crime squad, the West Midlands force enjoys the confidence of the majority of people, as evidenced by the fact that last year crime in the west midlands fell faster than in any other metropolitan authority? That is despite the fact that the chief police officer in Birmingham has not only investigated the serious crime squad but has abolished it.

Mr. Hurd: Each time I go to the west midlands and discuss crime and policing matters with all parties, I am impressed by the high reputation of the force, which performs very well under outstanding leadership.

Mr. Maclennan: In the light of the cases to which the Home Secretary has referred, will he further consider the possibility of allowing police officers to have a right of confidential access to the Police Complaints Authority where they believe that misfeasance or malpractice within the police force cannot be put right without external intervention?

Mr. Hurd: I should like to consider that point against the background of what is available under present procedures.

Mr. John Marshall: Is my right hon. Friend aware that many Conservative Members are sickened by the way in which certain other hon. Members seek to act as apologists for the IRA?

Mr. Hurd: That has not surfaced today when we have had a serious set of exchanges about the course of justice in Britain, but I am sure that all Opposition Members will have taken note of what my hon. Friend has said.

Mr. Corbett: Will the Home Secretary take this opportunity to say sorry to the Guildford Four, since no member of the judiciary or the Government has yet been able to get that word past his or her lips? When the Home Secretary had talks with the chief constable on the investigation into the former West Midlands serious crime


squad, did he undertake to keep an open mind on its outcome, especially if wrongdoings by officers raise renewed doubts about the safety of the convictions in the Birmingham Six and Carl Bridgewater cases? Will he assure the House that his mind remains open on those matters?

Mr. Hurd: Mr. Shaw's investigation was set in hand not by me but by the chief constable, Mr. Dear, of his own volition. It is taking place under the supervision of the Police Complaints Authority, which is completely independent. However, the hon. Gentleman is right. If the investigation, which was set up because of complaints about recent cases and so rightly and naturally will concentrate on those cases, gave rise to a train of thought or evidence that led to earlier cases, any convictions that arose from those cases would clearly have to be looked at. That is not the position at the moment and I have no reason to suppose that it will be.
I expressed regret in the House a week ago. I did that very clearly. But I hope that Opposition Members, in their pursuit of this matter, will take into account the fact that the people who suffered most from it were not those who were wrongfully imprisoned, but those who were murdered at Guildford.

Mr. Speaker: Question No. 5.

Ms. Short: On a point of order, Mr. Speaker. I think that the Home Secretary will, on reflection, want to retract what he has just said. He has smeared the four people who were wrongly convicted in Guildford and he is wrong to do so.

Mr. Speaker: Order. I am sorry, but I did not call the hon. Lady.

Mr. Hurd: Further to that point of order, Mr. Speaker. I was making a statement of fact and I am surprised that anyone should contradict it.

Mr. Hattersley: On a point of order, Mr. Speaker.

Mr. Speaker: Points of order take time out of questions. Points of order at Question Time must be on matters which require a ruling from me. What is the point of order?

Mr. Hattersley: My point of order to you, Mr. Speaker, is that my hon. Friend the Member for Birmingham, Ladywood (Ms. Short) and I understand your ruling that Question Time must continue in its normal way, but if the Home Secretary wishes to pursue the arguments, so will my hon. Friend and you must call the Home Secretary to order in just the same way.

Mr. Speaker: Order. I am not responsible for what is said, provided that it is in order. Question No. 5.

Mr. Hurd: rose——

Mr. Heffer: On a point of order, Mr. Speaker.

Mr. Speaker: We have reached only question No. 5 and we are making slow progress. I must hear the point of order if it arises out of this and if it is a matter needing my intervention.

Mr. Heffer: I raise my point of order because of what the Home Secretary has implied. Of course, every one of us

agrees that those who were killed were the victims, but surely that does not lead anyone to say that those who were wrongly imprisoned were not as badly treated——

Mr. Speaker: Order. The hon. Gentleman will have to pursue that through the Front Bench, not through the Chair. That is not a matter of order. The Chair cannot be held responsible for answers that are given to questions.

Sir Bernard Braine: On a point of order, Mr. Speaker. Since when has it been the practice to permit points of order to be raised during questions, wasting the time of hon. Members on both sides, when we all know that points of order can only be accepted by you after questions?

Mr. Speaker: Order. It has always been the practice that, if an hon. Member raises a point of order requiring my intervention—and I cannot judge whether it is such a point of order until I have heard it—it is dealt with at the time. What is not in order, as the whole House knows, is to seek to raise points of order immediately after questions on matters arising out of them. I heard that point of order at the time, to judge whether it was a point of order for me.

Drug Abuse

Mr. Baldry: To ask the Secretary of State for the Home Department if he will make a statement on the progress of the work of the ministerial group on drug abuse.

Mr. Hurd: The ministerial group on the misuse of drugs last met, under my chairmanship, on 16 October. It endorsed my proposals for the establishment of locally based drug prevention schemes in nine areas most at risk from drug misuse, and in particular from the threat of cocaine and crack.
Other issues discussed included plans for the next phase of the national drug misuse prevention campaign, developments in drugs education, drug-related development assistance overseas under the aid programme and plans for the world ministerial summit on drugs, to be held in London next April.

Mr. Baldry: While it must be right not to risk glamorising crack by dramatising its effects, is my right hon. Friend confident that every parent, teacher, school governor and community or youth worker—especially in vulnerable communities—is fully aware of the dangers that crack poses to all our children? Is he confident that they are aware of the collective action that is being taken, and can be taken, to fight back against crack?

Mr. Hurd: Yes. Whatever we do about enforcement, I think that education to reduce demand is the key. That is why it is so important that my right hon. Friend the Secretary of State for Education and Science put drug liaison officers into each local education authority, and why the national curriculum will now ensure that every primary and secondary school provides proper education so that young people understand the acute dangers and miseries resulting from the misuse of drugs.

Mr. Randall: Is the Home Secretary aware of the various press reports suggesting that major drug suppliers in north America, the Caribbean and South America intend to target Europe and, in particular, the United Kingdom, with cocaine, crack and other hard drugs? Is he also aware that, according to Home Office statistics, the


Government's policies have failed even to contain the growth in drug taking? How can the people of Britain be confident that the Government understand the scale of those threats to our country? Does the right hon. Gentleman accept that a considerable increase in resources will be needed from the Government to crush this evil trade?

Mr. Hurd: I can certainly answer yes to the last part of the hon. Gentleman's question, without accepting the earlier part. We need to strengthen our defences at all points. That includes help for Third world countries, a serious effort to stifle the production of dangerous drugs, increasing the Customs and police presence at our ports and airports and retaining the necessary checks there, and substantially more expenditure on the communities at greatest risk, on education and on the treatment of addicts. All those measures are necessary, and all are being strengthened.

EC Border Control

Mr. Knox: To ask the Secretary of State for the Home Department if he will make a statement about border control between Britain and the other European Community countries.

The Minister of State, Home Office (Mr. Tim Renton): Discussions with our Community partners are continuing. We have continued to emphasise the importance of retaining at United Kingdom ports and airports effective checks to control immigration by non-EC nationals, and to deal with terrorism, drug trafficking and other serious crime. At the same time, we have shown our commitment to joining other Community countries in practical measures to strengthen the external frontier of the Community and co-operation between states in counterterrorism and law enforcement. I believe that our position is increasingly well recognised within the Community.

Mr. Knox: Will my hon. Friend give an assurance that the Government will try to get rid of every unnecessary bureaucratic control on movement within the Community?

Mr. Renton: Yes, I can certainly give that assurance: every unnecessary control will be removed. My hon. Friend will know that in March we introduced a new immigration channel that merged the British and EC channels, so that both British and all other EC nationals could enter the United Kingdom with the minimum of difficulty. I have no doubt, however, that frontier checks will remain an indispensable part of our control, to impose proper control on third-country nationals entering this country, and to prevent the entry of terrorists and major criminals.

Mr. Darling: Is the Minister aware of the growing concern about the quality of decision-making as it affects individual tourists visiting Britain? As we move towards a common regime for entry throughout Europe in 1992, will he consider the need to set up a review procedure so that badly taken decisions can quickly be looked at, especially as he himself has abandoned any pretext of reviewing decisions by individual officers?

Mr. Renton: No. I totally disagree with the hon. Gentleman. There is constant and increasing pressure due

to the number of people who want to enter the United Kingdom. In 1978, 27 million people came into this country and in 1988 the figure was 45 million. Every time we try to improve the procedures, the Opposition vote against it. [Interruption.]

Mr. Speaker: Order. I ask the House to settle down. There are other questions to follow.

Cocaine and Crack

Mr. Lord: To ask the Secretary of State for the Home Department what steps his Department is taking to combat the threat from cocaine and crack.

Mr. Hurd: We are already pursuing a comprehensive programme of action to tackle both the supply of and the demand for drugs including cocaine and crack. Recent measures include agreement to provide a substantial package of drug-related assistance to Colombia in the form of law enforcement training and equipment. We are also providing £2·3 million to set up locally based drug prevention teams in areas most at risk from drug misuse and in particular from the threat of cocaine and crack.

Mr. Lord: While congratulating my right hon. Friend on the measures he has already taken, may I urge him to take even sterner measures against the villainous men who organise drug trafficking, with particular reference to the sentences that they serve and the confiscation of their profits so that they are left in no doubt whatsoever that if they are caught and convicted they will serve long prison sentences and will never benefit from their ill-gotten gains?

Mr. Hurd: I agree with my hon. Friend on sentencing and on the confiscation of assets. Our new legislation is beginning to work well and the total confiscated is now £14 million. My right hon. Friend the Prime Minister this week signed the 11th agreement that we have with other friendly countries to provide for the mutual confiscation of assets.

Mr. Bermingham: Does the Home Secretary agree that while it is all very well to talk in these global terms, perhaps a little more investment in police dogs and good equipment for the police forces would help them in the war against crime?

Mr. Hurd: Yes, of course. That is why every police regional crime squad in the country has a drugs wing.

Police Establishments

Mr. Pawsey: To ask the Secretary of State for the Home Department what plans he has further to increase police establishments.

Mr. Hurd: I will be able to approve a further 1,100 police posts, to be allocated between provincial forces and the Metropolitan police, in 1990–91. I will take advice from Her Majesty's inspectorate of constabulary on the increases for provincial forces, and I hope to announce the approvals as soon as possible before the end of the year.

Mr. Pawsey: May I thank my right hon. Friend for that typically helpful response? Is he aware that in Warwickshire motorway mileage has increased substantially and police establishments have not kept pace with that growth? Therefore, I should be grateful if my right hon. Friend could reconsider the establishment in Warwickshire, particularly as officers are being taken from


the beat to supervise motorways. Will my right hon. Friend comment on the fact that Warwickshire is successfully policed only because of the action of special constables who do a marvellous job? We would be grateful if he were able to reconsider the numbers of police in our county.

Mr. Hurd: I do not know of any police force that does not have a persuasive case for having a good many more police. Warwickshire had an extra 11 men last year and it has applied for another 35. As I have said, I shall consider that carefully when I look at the totals. My hon. Friend is quite right about the specials. He and I spent an impressive Sunday morning at a parade of the Warwickshire specials and I was deeply impressed by the people who came forward to help the community.

Mr. Nellist: Will the Home Secretary consider increasing the police establishment allocated to Mr. Shaw in his investigation of the West Midlands regional crime squad specifically to allow him to go back beyond the two-year limit set for that investigation so that the suspicion that the techniques involved in the Birmingham Six and the Carl Bridgewater murder case, both of which involved disputed confessions, little forensic evidence and officers from that now-disbanded squad, could be properly tackled by the investigation?

Mr. Hurd: There is no limit of time such as the hon. Gentleman suggests. Mr. Shaw is naturally and properly concentrating on those cases, doubts about which caused his inquiry to be set up.

Electronic Surveillance Devices

Mr. Cran: To ask the Secretary of State for the Home Department what plans he has to introduce measures to regulate the manufacture and sale of electronic surveillance devices.

Mr. Renton: None, for the reasons given in my response to the debate on electronic surveillance devices initiated by my hon. Friend on 13 March.

Mr. Cran: Will my hon. Friend take this opportunity to condemn the Tandy Corporation stores group, which is currently marketing an electronic scanner device that facilitates eavesdropping on other people's telephone conversations? That has ramifications for security, the police and individuals in business. Does he agree that that is a gross invasion of privacy, and is he prepared to say what the Government will do about it?

Mr. Renton: I am well aware of my hon. Friend's deep concern about the subject, but I am not aware of the equipment to which he refers. I ask him not to overlook the 1985 legislation, which dealt with the interception of the public telecommunications system. If the use of the electronic scanner involves such interception, criminal offences and penalties, as set up by the Interception of Communications Act 1985, will come into play.

Oral Answers to Questions — PRIME MINISTER

Engagements

Mr. Day: To ask the Prime Minister if she will list her official engagements for Thursday 26 October 1989.

The Prime Minister (Mrs. Margaret Thatcher): This morning I presided over a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today.

Mr. Day: Is my right hon. Friend aware that the proportion of income tax paid by Britain's high-rate taxpayers is greater than it was in 1979? Does she therefore agree that any proposal to increase that high rate to 50 per cent. or more would have a disastrous effect on the British economy? Does she further agree that that would lead to a reduction in revenue for the Exchequer? In view of that, has she any special message for my constituents in Cheadle, who would be adversely affected by such a proposal?

The Prime Minister: Yes, my hon. Friend is absolutely correct. The top 5 per cent. of income tax payers now pay 28 per cent. of income tax yield, whereas they paid only 24 per cent. in 1979. Lower taxes have led to a higher yield. That higher yield and the extra wealth created by our policies of tax incentives and enterprise have not only meant a higher standard of living throughout the whole income tax scale but a much higher standard of social services.

Mr. Kinnock: Has it come to the Prime Minister's notice that since she was last at the Dispatch Box in July, Britain's balance of payments has moved a further £5·9 billion in the red, that Britain's home buyers and businesses have been hit again by higher interest rates and that in the meanwhile the number of Chancellors has doubled? In the interests of team spirit, will she get rid of the part-time one?

The Prime Minister: Interest rates will stay as high as is necessary for as long as is necessary to get inflation down. With regard to interest rates and mortgage rates, the right hon. Gentleman must be very glad that we do not have a Socialist Government, because in Australia mortgage rates are 18 per cent.

Mr. Kinnock: I understand the Prime Minister's reluctance to answer the question about Sir Alan, or indeed any other Chancellor of the Exchequer. It would be wholly inappropriate for her to dismiss Sir Alan when she so completely concurs with everything he says, and everybody knows it. Is she aware that the confusion that is at the heart of Government policy will remain as long as Sir Alan does?

The Prime Minister: Advisers advise and Ministers decide. Ministers in this Government have a very sound economic policy, which is more than the Opposition have.

Mr. Kinnock: Does the report that the Prime Minister concurs with the view of her adviser faithfully represent her position?

The Prime Minister: Had the right hon. Gentleman listened to previous replies, he could not have asked that


supplementary question. Advisers advise and Ministers decide. Ministers have decided, and we have an excellent economic policy.

Sir Anthony Grant: When the subject of sanctions on South Africa arises, will my right hon. Friend always recall that the Labour Government spent substantial sums of public money to promote trade with South Africa, and in that context treat anything that the Opposition say on that subject as total humbug?

The Prime Minister: Yes, I recall that. The Labour Government did promote trade with South Africa. Labour also opposed comprehensive sanctions in the United Nations.

Mr. Ashdown: Given the worries expressed today in the City about the possibility of a recession, will the Prime Minister tell the House whether she agrees with her Chancellor of the Exchequer that Britain's having a £20 billion trade deficit is not a serious problem?

The Prime Minister: As the right hon. Gentleman is aware, I have always supported my right hon. Friend the Chancellor of the Exchequer in his management and handling of the economy. He does not say that the deficit is not a problem. He says that the measures which he has taken will bring down inflation and the trade deficit.

Mr. Cash: Has my right hon. Friend noticed President Mitterrand's remarks on the question of a new treaty, as opposed to a revision of the treaty of Rome? Does she agree that this is a dangerous path upon which to embark? Does she agree that it would be extremely dangerous and not in the interests of either the European Community or any of the member states to pursue this proposal to a logical conclusion at the summit or in the run-up to the intergovernmental conference?

The Prime Minister: We have yet to absorb the consequences of the Single European Act and all the changes that will be brought about when we come to 1992 with a real common market. There will be a major change in the whole of Europe. It would be premature to have another intergovernmental conference before we properly come to 1992, and even then it will take years to absorb the consequences. It is, however, clear that an intergovernmental conference can be called by a simple majority at a meeting of Heads of Government, but in order for it to make any effective proposals decisions would have to be agreed with unanimity.

Mr. Ronnie Campbell: To ask the Prime Minister if she will list her official engagements for Thursday 26 October.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Campbell: Will the Prime Minister abolish the tax on workplace nurseries?

The Prime Minister: No. Workplace nurseries are treated just as other extra facilities are—as benefits in kind for those earning over a certain salary. It would be quite wrong if those who have nurseries available at work were not to regard that as a benefit in kind while other people who had to make their own arrangements had to pay out of net taxed income.

Mr. Watts: To ask the Prime Minister if she will list her official engagements for Thursday 26 October.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Watts: Does my right hon. Friend agree that the statement yesterday by my right hon. Friend the Secretary of State for Social Security contained unparalleled good news for the disabled and those who care for them, providing an extra £100 million a year over and above normal indexation to more than 500,000 people?

The Prime Minister: Yes. My right hon. Friend the Secretary of State for Social Security decided that the disabled were most in need of extra help and added to our excellent record on the disabled. We already spend, over and above inflation, 90 per cent. more on people who are disabled than was spent when the Labour party was in power. I notice that a family with a very severely disabled child will get up to £65 a week extra in benefits. That is very good news.

Mr. Lofthouse: When the innocent Guildford Four were found guilty does the Prime Minister think that they should have been hanged?

The Prime Minister: If the death penalty had been available, it would have been a matter for the courts and not for us. I believe however, speaking personally, because it is always a matter for the individual vote, that a death penalty should be available to the courts in cases of the most hideous murder. No one should be able to go out and perform the most hideous, bestial, and vicious murders and know that their own life is not forfeit.

Mr. David Evans: To ask the Prime Minister if she will list her official engagements for Thursday 26 October.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Evans: Does my right hon. Friend agree that, with a few exceptions, the British people pay themselves far too much money? [Interruption.]

Mr. Speaker: Order.

Mr. Evans: Does the Prime Minister view with alarm the engineers' threatened strike for a 35-hour working week, which will leave Britain with the shortest working week in the industrial world?

The Prime Minister: My hon. Friend is correct. In the past year earnings seem to have gone ahead of increases in productivity, and that has put up our unit labour costs and will make us uncompetitive with those people in our industrial competitor countries—in Germany, the United States and Japan. It is vital that we stay competitive. I share my hon. Friend's concern about the possibility of a 35-hour week. Some of us do 35 hours in two days and then again in another two days.

Mr. Foulkes: To ask the Prime Minister if she will list her official engagements for Thursday 26 October.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Foulkes: Will the Prime Minister consider repudiating what the Foreign Secretary said yesterday and will she rule out the use of force when repatriating the Vietnamese boat people?

The Prime Minister: No. Most countries repatriate illegal immigrants, unless they are not really illegal immigrants but refugees, in which case it is totally different. Some 13,000 of the Vietnamese boat people have so far been found to be refugees. Most countries repatriate illegal immigrants involuntarily. We also put back over the Chinese border from Hong Kong over two years some 35,000 illegal immigrants from China. The United States repatriates people to Mexico and Haiti. There is nothing unusual about deporting to repatriate.

Mr. Kirkhope: To ask the Prime Minister if she will make a statement on the Government's inner cities policies.

The Prime Minister: Excellent progress continues to be made in the regeneration of our inner cities under the Government's action for cities programme, spending on which is planned to increase from £ billion in 1988–89 to about £.3·5 billion this year. Unemployment in the 57 inner city target areas has fallen by 23 per cent. over the past year.

Mr. Kirkhope: Does my right hon. Friend agree that our policies have set the people free from the shackles of Labour local authorities, enabling them to take a full role in implementing all the improvements that are going on around them?

The Prime Minister: Yes, the regeneration of the inner cities is due to our policies. We formed urban development corporations in many cases to get round extreme Left-wing councils. Secondly, the policy of enterprise and personal

responsibility has paid off handsomely, both in increased jobs and in an increased sense of responsibility and co-operation between industry and the people in inner city areas. The story is a good one and could never have happened under the arrogant controls of Socialism.

Mr. Livingstone: Will the Prime Minister tell the House whether she shares the concern that is widespread in society, that convictions should not be based——

Mr. Speaker: Order. This is a definitive question to the Prime Minister.

Dame Elaine Kellett-Bowman: Will my right hon. Friend reflect, when dealing with the problems of the inner cities, that health problems are important? Will she call to the attention of her right hon. and learned Friend the Secretary of State for Health the fact that the problems of Manchester and Liverpool should be taken into account when setting the regional health budgets and not only, as proposed, the problems of London?

The Prime Minister: I take my hon. Friend's point and I will draw the attention of my right hon. and learned Friend the Secretary of State for Health to it. I have, of course, visited Liverpool comparatively recently and seen the great improvements taking place there.

Mr. Vaz: The Prime Minister may recall that on 18 October 1972 in this House, a Conservative Minister, in response to the plight of the expelled Ugandan Asians, stated that there was always a small number of nasty people seeking to make their lives difficult. Is that not the perfect example of the Government's current policy on the proposed compulsory repatriation——

Mr. Speaker: Order. That has nothing to do inner cities.

Commonwealth Conference

The Prime Minister (Mrs. Margaret Thatcher): With permission, Mr. Speaker, I shall make a statement on the meeting of Commonwealth Heads of Government held in Malaysia on 18 to 24 October, which I attended with my right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs. A copy of the final communiqué of the meeting has been placed in the Library of the House. Apart from the customary debates on global prospects and current international, political and economic matters, the Heads of Government themselves dealt with five main issues: the global environment, southern Africa, the future of the Commonwealth, drugs, and the choice of a new Commonwealth Secretary-General to succeed Mr. Ramphal in July next year. I am sure that the whole House will join me in paying tribute to the enormous contribution which Sonny Ramphal has made to the Commonwealth during his 14 years as secretary-general.
I will deal with the main subjects in order—[Interruption.]

Mr. Speaker: Order. This is an important statement, which the House wishes to hear.

Mr. Dennis Skinner: They are applauding Sonny Ramphal.

Mr. Speaker: Order. We cannot have a running commentary.

The Prime Minister: First, I shall deal with the environment. The meeting agreed a statement—the Langkawi declaration—setting out a Commonwealth programme of action to deal with the main environmental problems facing the world. Particular points to which I would draw attention are the commitment to take more account of environmental considerations in reaching economic decisions, the support expressed for existing international environmental organisations, especially the United Nations environment programme, the endorsement of the United Kingdom's initiative calling for the negotiation of an international framework convention on global climate change and the encouragement given to developing countries to improve the management of their rain forests, which is very important to arrest the increase in carbon dioxide in the atmosphere.
Our particular concern in the debate on these issues was that any additional resources should not go to creating new bureaucracies, but directly to measures to protect and improve the environment. This concern is fully met in the Commonwealth's statement. The Langkawi declaration is a major achievement for the Commonwealth and particularly for our Malaysian chairman, Dr. Mahathir, on whose initiative it was drafted.
Secondly, I shall deal with southern Africa. Heads of Government issued a statement entitled "Southern Africa: The Way Ahead", which marks a significant step forward on a number of points from earlier Commonwealth statements. It recognises that important changes are under way in South Africa, that sanctions ought not to be punitive and that, if sufficient political progress is made in South Africa, the process of relaxing some of the international restrictions against South Africa should begin. This is the first time that the entire Commonwealth

has adopted this approach. I am grateful to my right hon. Friend the Foreign Secretary for the skilful manner in which he negotiated those improvements.
The Commonwealth statement also contains four main points with which the United Kingdom does not agree and our disagreement is explicitly stated on the face of the document, but without explaining either the view we take or the reasons for it. It was to fill that gap that my right hon. Friend and I decided to issue a separate statement setting out Britain's views on those points. A copy of the statement has been placed in the Library of the House.
We believe that the approach set out in our document is the more positive and constructive one and takes more account of the significant changes that are actually happening in South Africa, including the decision taken by the South African Government during the Commonwealth meeting that a major African National Congress rally may be held for the first time in 30 years, and addressed by Mr. Sisulu. In the light of this and other recent steps, our aim must surely be to reward progress and encourage South Africa further down the path of reform, rather than to respond with more punitive sanctions.
We made it clear in our statement that, instead of making a financial contribution to the proposed agency to report on South Africa's international financial links or to the continuing work of the Commonwealth Committee of Foreign Ministers on South Africa, we shall make available an equivalent amount of money for additional help to black South Africans. I would remind the House of the substantial sums that the United Kingdom is already making available for such help, as well as to the front-line states.
Our statement also announces our willingness to provide financial help to an independent Namibia as well as—if asked—military training for Namibia's armed forces after independence. We of course give similar help to Zimbabwe, Mozambique and many other Commonwealth countries in Africa.
Thirdly, Heads of Government had a discussion of the Commonwealth in the 1990s and beyond. They decided to set up a group of Heads of Government—of which Britain will be part—to identify the enlarged roles that the Commonwealth might need to play. We welcome that.
Fourthly, we discussed the problem of drugs, recognising the very serious threat that they posed in all our countries and the consequent need for training—particularly for smaller states—in customs procedures, law enforcement, in methods of detection, in education and in treatment of addicts. I expressed the hope that by the time of our next meeting in 1991 a large number of Commonwealth countries would have concluded bilateral agreements on freezing and confiscating the assets of drug smugglers. Britain has taken a lead both in the Commonwealth and more widely in concluding such agreements. We have now signed 10 of them, the last one of which was in Malaysia.
Fifthly, the meeting elected Chief Emeka Anyaoku as the new Secretary-General of the Commonwealth. He has lived in Britain for many years and is a great friend of our country. The whole House will wish him well
I would draw attention to four further points in the final communiqué. The first, was a most welcome reference to the importance of Hong Kong's continued success, and a commitment to assist in any way possible in promoting


the continued prosperity of Hong Kong. That was a major British objective at the meeting and will, I believe, offer welcome reassurance to Hong Kong's people.
The second was the reaffirmation of the need for speedy action to deal with the problem of Vietnamese boat people in Hong Kong, including as a matter of priority the return to Vietnam of all those who do not qualify as genuine refugees.
The third was a recognition of the need to increase aviation security world wide, particularly important in the wake of the Lockerbie disaster—[interruption]

Mr. Speaker: Order.

The Prime Minister: —coupled with a strong denunciation of terrorism in all its forms and a call for the immediate safe release of all hostages.
The fourth was a call on all Commonwealth Governments to accede to or ratify international covenants on human rights, which a surprising number have regrettably not yet done.
Despite the difference of views on South Africa, this was a valuable and successful meeting and its success owes much to the very skilful chairmanship of Prime Minister Mahathir.
We have disagreed before on South Africa within the Commonwealth, indeed many times, but this has not damaged our relations with individual Commonwealth countries or the institution itself. The Government will persevere with their present policy on South Africa, because it offers the best prospect of peaceful negotiations and of achieving a new South Africa which will inherit a strong economy.

Mr. Neil Kinnock: May I first associate myself fully with the Prime Minister's tribute to Sir Sonny Ramphal and offer my congratulations and good wishes to Chief Emeka Anyaoku on his election as secretary-general? May I also take this opportunity to welcome the whole of the constructive communiqué from the Heads of Government meeting in Kuala Lumpur and regret that the Prime Minister could not do the same thing?
The Kuala Lumpur meeting exposed discrepancies in the British Government's approach. On the environment, for instance, is it not clear that the Prime Minister's professions of concern for the global environment have yet again been equalled only by her resistance to backing that concern with practical commitments? On overseas aid, the Prime Minister pledged in the Kuala Lumpur communiqué to make
renewed commitment and effort to meet the United Nations aid target
of 0·7 per cent. of GNP. How does the Prime Minister reconcile that with the Government's record of cutting overseas aid to 0·3 per cent. of GNP during their time in office?
I turn now to the issue of sanctions against apartheid. In Kuala Lumpur, the Prime Minister put her signature to a Commonwealth agreement which her Foreign Secretary helped to compile and which she herself proposed for adoption, which states:
this is not the time to consider any relaxation of existing sanctions and pressures … all existing sanctions and measures should be maintained.
How can the Prime Minister reconcile that with her action a short time later when she put out a statement, apparently

without reference to her Foreign Secretary, which was hostile to all sanctions and which stated that the effect of such sanctions would be to "increase resistance to change"? Is that not a gross inconsistency? Would it not be more honest if in future the Prime Minister were to sign all international agreements with invisible ink—[HON. MEMBERS: "Rubbish."] No, it is true—[Interruption.]

Mr. Speaker: Order.

Mr. Kinnock: In the wake of the Commonwealth meeting, is it not clear that it is difficult for anyone to trust a Prime Minister who signs a document at 5 and repudiates it at 6 o'clock? Does the Prime Minister understand that nobody doubts her right to free speech, but what disgusts people is the way in which she exercises that right with a forked tongue? [Interruption.]

Mr. Speaker: Order.

Mr. Kinnock: Finally, is the Prime Minister aware that the editorial in Tuesday's edition of the South African National party newspaper was headlined simply "Thanks, Maggie"? Does that not say all that needs to be said about a Prime Minister who has moved from being an appeaser of apartheid to being the agent for it?

The Prime Minister: With regard first to the right hon. Gentleman's comments about the global environment, he is aware that this Government have done more to protect the environment than any previous Government; that we have committed the sum of £2 billion to get rid of sulphur dioxide in coal in power stations; that this year, for example, we are spending £1·3 billion on improved water and sewerage, whereas the Labour Government cut such expenditure; that we have the best record in Europe on rivers that flow into the North sea, and so on and so forth. We hosted the ozone layer conference. We are committed to reduce substantially the amount of CFCs and to move to a 100 per cent. reduction, provided that the relevant research has produced proper alternative substitutes. It was our proposal to have a global convention on CO2 and the greenhouse effect—a proposal which was taken up by other nations. On the environment, the Labour party cannot touch this Government's record—[Interruption.]—and nor can many other people.
On the right hon. Gentleman's totally inaccurate comments on our document on sanctions, I must advise him that my right hon. Friend the Foreign Secretary actually wrote part of that document, so for the right hon. Gentleman to say that my right hon. Friend did not even see it is to be just about as plum stupid as anyone can get. That document was in response to the four parts of the original document with which we disagreed on the face of the document. We thought it best to set out the reasons for our disagreement in writing, so that people could not quarrel with them.
As for the right hon. Gentleman's general proposals on sanctions, I remind him that the Labour party, when in power, said before the United Nations:
We voted against comprehensive sanctions together with France, West Germany, the United States and some other Western countries because we do not agree that the far-reaching economic measures which the resolution calls for would produce the changes in South Africa which we would all like to see.
That was said on 16 January 1978 by the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands), and the


right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). The right hon. Gentleman also said, in the Official Report for 7 July 1976:
I do not believe that a policy of general economic sanctions would be in the interests either of the British people or of South Africa."—[Official Report, 7 July 1976; Vol. 914, c. 1354.]
Moreover, perhaps the right hon. Gentleman should read Archbishop Tutu on sanctions when it was proposed that they should be actively imposed on Panama:
These sanctions have led to the destruction of the country's economy, caused immense suffering on the poorest of the poor, increased unemployment and aggravated social problems. The majority of Panamanians are opposed to sanctions. These sanctions inflict a double oppression on the people of Panama.
Finally, two out of three black South Africans, when asked whether sanctions would cause unemployment and whether they wanted them, said no. It is this Government who are in step with the people of black South Africa, not the right hon. Gentleman.

Mr. Julian Amery: Is my right hon. Friend aware that early editions of the British newspapers and the communiqués on the World Service of the BBC after the communiqué was issued carried headlines that ran, "Thatcher tightens sanctions"? It was absolutely essential that she and our right hon. Friend the Foreign Secretary should have put the matter right in their subsequent communiqué.
Would it not also be of interest, given that the Leader of the Opposition protests strongly against the line that my right hon. Friend took—with wide popular support in this country—to see whether he is prepared to put the matter to the test in a debate in this House?

The Prime Minister: I am grateful to my right hon. Friend. I have not heard what the BBC said, but what he says gives extra support to the path that we took of making our views absolutely clear in writing. That was much better than giving unattributable briefings, as many other Heads of Government did. Some of them made speeches in public at the opening session of the Commonwealth conference clearly setting out their views. They are therefore not at liberty to criticise us for setting out ours. They must not deny to others the freedom of speech that they adopt for themselves.

Mr. Paddy Ashdown: May I take this opportunity of welcoming the Commonwealth statement, particularly the passage in respect of Hong Kong? But have not Singapore, Canada and Australia all expanded their immigration programmes considerably to help Hong Kong, and is not the United States planning to quadruple theirs? When will the Government end their impotent silence and honour what they have signed in the agreement?
On South Africa, surely the Prime Minister must realise, whatever her intentions, that the effect of her inept unilateral statement was to give succour to those who would wish to prolong apartheid in South Africa, to undermine the effectiveness of the Commonwealth statement and to bring discredit on the name of Britain?
Finally, is it just a coincidence that, at every single international meeting that the Prime Minister attends, she ends up as a lonely, discredited, minor, single voice?

The Prime Minister: I thank the right hon. Gentleman for what he has said about Hong Kong. Singapore has

given about 25,000 certificates to people in Hong Kong. They are not to be taken up immediately but holders may have citizenship of Singapore and not go there for some years. I know that that has been a great comfort to many such people. Some people from Hong Kong have taken houses in Australia and Canada. I think that in the case of Canada people have left Hong Kong to take up residence in cities such as Vancouver. Some reassurance is needed for people in Hong Kong whose residence there is vital for the future prosperity of Hong Kong. They need to be given some assurance that they may leave if things should turn out very badly in order that they may stay there to help Hong Kong to keep its prosperous standing. We hope to bring proposals forward by about the turn of the year.
The right hon. Gentleman is totally and utterly wrong about sanctions. We have made clear our abhorrence of apartheid and did so in the statement. We not only oppose sanctions but give practical help to black South Africans and to the front-line states. For example, we are supporting financially about 1,000 black South Africans on graduate or postgraduate work. We also support black South Africans who wish to purchase houses and special housing for black South Africans. We have given about £1·1 billion to the front-line states so that they may be better able to deal with their economic problems.
We note that some of those who are most ardent about sanctions do not impose them. I find utterly repugnant the fact that the only way the trade sanctions can work is by being punitive on black South Africans. I gave a specific example of a pineapple canning factory that closed a few days ago; because it no longer had the demand from Canada and the United States it was not able to keep going. That put 40 white South Africans out of work—and 1,100 black South Africans. That will please the right hon. Gentleman, but it does not please me.

Sir Peter Blaker: Since I understand that the other countries would not agree to include in the communiqué an explanation of the British point of view on the four points on which the communiqué said that we differed from the rest, was it not absolutely essential for us to find some means of putting on record our point of view? What better means than a written statement? Was that not particularly important in view of the continuous misrepresentation of the Government's point of view, not least by the Opposition?

The Prime Minister: Yes, I agree with my right hon. Friend. It was absolutely vital for us to put it in writing for everyone to see. My right hon. Friend is also quite right when he says that it set out in detail views that we were not able to have put into the communiqué. It starts off by saying:
Britain is fully at one with the rest of the Commonwealth in utterly condemning apartheid and wishing to see its total eradication so that all the inhabitants of South Africa can live in dignity and play a full part in the political life of their country.
When South Africa gets its constitution reformed and a new Government, that Government will inherit a strong economy. For that there will be one country in the Commonwealth that it can thank—Britain.

Mr. James Molyneaux: Is there not a real danger that the demand for unanimity among almost 50 countries—all differently situated—will in the end be used to blackmail us into accepting policies that the House would not approve?

The Prime Minister: The right hon. Gentleman knows full well that it would be very difficult to blackmail this Government or me in particular, and all my colleagues. We are not likely to be blackmailed in any way. I should add that before the Commonwealth conference ended—and it ended very amicably, as one would expect—barely was the ink dry on the communiqué than I received a letter from a Head of Government of an African country saying that if the financial sanctions that the rest of them had agreed actually worked, it would be very tough on his country and would make things much worse, and could he please have extra aid to deal with it. I said no. People must suffer the consequences of that which they put their hand to.

Mr. Quentin Davies: Does my right hon. Friend agree that, since we had made an explicit reserve about our attitude towards sanctions in the communiqué, nothing could have been more normal than that we should either explain that reserve or continue to advocate the policies that seemed sensible to us? Therefore, will she dismiss the synthetic indignation on this subject as the cant that it is? My right hon. Friend enjoys the strongest support in this country for the robust line that she took in the face of the hypocritical pressure on sanctions. Will she tell some of her colleagues in the Commonwealth that if the Commonwealth desires to turn itself into an international tribunal of human rights, there are a great many better targets, from China to Peru and including one or two in the Commonwealth, which might better repay their attention?

The Prime Minister: I am grateful to my hon. Friend. One of two things happens with economic sanctions. If they do not work, it is because other countries take up the trade. To some extent, that has already happened in South Africa. Our share of the trade in South Africa is less than it was, and Germany and Japan have taken up that trade. If they do work, they work by punishing the most vulnerable—as Archbishop Tutu said about Panama—and making them suffer poverty and even starvation in a country with no social security.
I find it repugnant that people at the Commonwealth conference should sit round a table, having been entertained in excellent hotels with excellent facilities, and decide who will suffer poverty and starvation in another country. We support Operation Hunger, which is aimed at relieving poverty in South Africa. It is absurd that other people in the Commonwealth are trying to magnify what we are trying to relieve.

Miss Joan Lestor: In reiterating the statement on substantial aid to the front-line states, will the Prime Minister take into account that, since 1979, aid has decreased to only 83 per cent. of what it was when we left office, representing in 1985 prices a reduction of £20 million? Therefore, when does she intend to increase aid to the front-line states? Will she deal with a point raised by my right hon. Friend the Leader of the Opposition? How is it that she can sign a communiqué pledging herself to the GNP target of 0·7 per cent. of aid for the Third world when aid has, until last year, been steadily reducing under this Government?

The Prime Minister: Since 1980, we have spent the considerable sum of £1·1 billion on aid to the front-line states, in assisting them to create new transport routes so

that they do not have to go through South Africa. In addition, we are providing military training in Zimbabwe. When I went there recently, there was an unusual occasion when I went to the eastern highlands and, with President Mugabe on one side and President Chissano on the other, watched British military officers training the Zimbabwean army and the Mozambican army. That is considerable extra help.
Few countries have reached the target of 0·7 per cent. of aid. However, the amount of private investment from this country to other Commonwealth countries is considerable, and one of the highest. It would be higher still if some were to take off some of the central planning and control that prevents a good deal of investment from going to their countries.

Sir Giles Shaw: If acts rather than words are important in this massively hypocritical debate about sanctions, has not the share of United Kingdom trade to South Africa declined far faster and further than that of any other Commonwealth country? I believe that, since the last Heads of Government meeting in Canada, Canadian trade with South Africa has increased.

The Prime Minister: Yes, Canadian trade with South Africa has gone up since we last met in Vancouver.

Mr. D. N. Campbell-Savours: Can I have an open, honest and frank response? Whose decision was it to issue the dissenting statement? Was it that of the Foreign Secretary or that of the Prime Minister? Is it not true that, if this had been left to the Foreign Secretary, there would have been no statement?

The Prime Minister: My right hon. Friend and I both decided to issue the statement. What people are complaining about is that it was an effective statement. That is why there was such a row about it. The dissent was on the face of the original communiqué. The explanation was on the face of the communiqué which my right hon. Friend and I jointly issued.

Sir Jim Spicer: Does my right hon. Friend agree that in two short months the Government of South Africa have made dramatic changes in their way of thinking? Does she further agree that the one certain way of throwing all that into reverse is to follow the line that has been put forward by the Opposition and by the other Heads of Government in Kuala Lumpur?

The Prime Minister: Yes. I agree with my hon. Friend. The de Klerk Government have done extremely well, first, in making it quite clear that the demonstrations could take place without interference, which they have. Secondly, the South African Government have released political prisoners. Thirdly, even while some people were trying to curb our freedom of speech in Kuala Lumpur, the South African Government were agreeing to an ANC demonstration at which Mr. Sisulu could speak freely. It was an ironic juxtaposition of events.

Dr. David Owen: How can the Government justify snubbing the ANC delegation at Kuala Lumpur and not meeting it when the former Foreign Secretary had met the ANC and when the Government have recently seen Jonas Savimbi? In similar stages in the liberation struggle, the Government have been prepared to meet the Patriotic Front and SWAPO.

The Prime Minister: We treat it in precisely the same way as we have done the PLO, for example, and said that if it would renounce violence my right hon. Friend the Foreign Secretary would see members of the ANC. The right hon. Gentleman will be aware that the Eminent Persons Group concept is negotiations in return for the suspension of violence. In these days, that is perhaps handled in a slightly different way by saying "peaceful negotiations". That means precisely the same thing. My right hon. Friend the Foreign Secretary did not get a reply from the ANC which indicated that it was prepared to suspend or renounce violence, and that is why he did not see it.

Sir Ian Lloyd: Having recently visited some of the excellent projects that the British Government are funding in South Africa, projects which the shadow Foreign Secretary failed to visit when he was there, I must endorse heartily what my right hon. Friend the Prime Minister has said about that assistance. May I express my profound admiration for her cheerfulness and for the moral courage which she exhibited in Kuala Lumpur?
I suggest that when the agenda for the next Commonwealth conference is prepared, my right hon. Friend suggests to the new secretary-general that he places three documents before all the delegates. The first, if I may say so, is the wonderful cartoon that she and I and those of our generation will remember when Low published it in the Evening Standardin June 1940—"Very well, then—alone!" I suggest that the second document should be the Amnesty International report, which should be left open at the page marked "India" for all those concerned to see. Finally, may he lay before all the delegates the wonderful speech which was made by Burke in this place just over 200 years ago when he reminded the House that there was no way known to him in which one could "condemn an whole people"?

The Prime Minister: I am grateful to my hon. Friend, who has made his own points extremely effectively. I am grateful to him for the confirmation that he gives that our approach of alleviating problems of black South Africans is one of practical help and not of posturing. I notice that many of the states in Africa that demand comprehensive sanctions do not apply them themselves. There are, for example, no airlines flying from the United States directly to South Africa, but they fly to the capitals in black Africa, from where the passengers are then promptly flown down to Johannesburg. That hardly seems to be doing what they are preaching.

Mr. Jack Ashley: Following the Prime Minister's unhappy exchanges with President Mugabe of Zimbabwe, when he called the right hon. Lady "despicable" and she called him "ritualistic", what was the point of her comment that he was only too happy to accept British aid? Was this not a patronising and insulting way of telling him that freedom of speech was the payment for any economic assistance from Britain?

The Prime Minister: Mr. Mugabe said some things about our attitude to apartheid which he knew were entirely untrue, and which were shown to be untrue on the face of the document which we ourselves issued, which stated that Britain is fully at one with the rest of the Commonwealth in utterly condemning apartheid. We have been very generous, and will continue to be, in

helping Zimbabwe—I made that perfectly clear—both with military training and with aid. I do wish sometimes that people would not use some of the language that they do, which tempts one to reply in the same coin. I did not, in fact.
At the same time I expressed to President Mugabe considerable sympathy with the difficulties that he is in over the ivory ban. There are far too many elephants in Zimbabwe, and they have to cull them, which they do very well. They finance that operation by selling the ivory from the elephants which are properly culled. President Mugabe does not lack support from me in the things which I agree he is doing extremely well.

Mr. James Kilfedder: May I congratulate the Prime Minister on injecting clarity and common sense into the deliberations of the Commonwealth conference? Will she visit the Republic of South Africa after the long-awaited release of Nelson Mandela and after further political progress has been made in that country—political progress that has been prompted by the actions of this Government?

The Prime Minister: I have not made up my mind about visiting South Africa. I should like to go there some time. but I do not think that now is the right time. More steps must be made towards solving the fundamental constitutional problem, and then I shall consider going. I repeat that we give practical help to black South Africans. Those who wish to impose economic sanctions will create poverty and hardship in South Africa, and that is not our way.

Mr. Robert Hughes: Is it not the case that, when the draft agreement was presented to the Heads of Government, some Prime Ministers sought to make changes to it but the right hon. Lady insisted that it could not be changed because it was an agreed document, so the document was proposed in its entirety? Therefore, are not her protestations that she has been exercising free speech and clarification quite preposterous?
Is the right hon. Lady aware that her demeanour at the Dispatch Box today absolutely confirms that her intention in producing that statement an hour later was to repudiate the part that related to sanctions? That is quite clear. Is not the reason for all that the fact that she has a secret agenda with de Klerk, and that her part of that agenda is to prevent change taking place? She makes so much noise about people losing their jobs, but is she aware that people in South Africa are afraid of losing their lives—or perhaps that is what she prefers?

The Prime Minister: The main parts of that document are agreed and were a compromise agreement. If anyone wished to change those parts of the document, we also would have wished to change them. We agreed to leave them precisely as they were. The four main parts of the document were disagreed, and it states, "with the exception of Britain" or "Britain disagrees". It is on those parts that we issued an especially clear statement.
Our view on apartheid is clear and our practical help for South Africa is clear, as is our hatred of economic sanctions. The hon. Gentleman is one of those who wish to impose punitive economic sanctions—[Interruption.]Economic sanctions are punitive. That is the only way in which they can work. If the hon. Gentleman is not in


favour of that, he must be very glad that our way prevailed and that black South Africans will not suffer from punitive economic sanctions.

Mr. Robert Banks: While I give a warm welcome to the statement that there will be a study into the role of the Commonwealth in the 1990s, will my right hon. Friend reaffirm this country's commitment to the Commonwealth institution and seek ways to improve its functions in the areas of mutual help, of trade, of education and of the understanding of democratic principles?

The Prime Minister: Yes. Some people were arguing that perhaps we needed to have a new role for the Commonwealth. I do not necessarily envisage a new role, but the Commonwealth exists on the basis of principles set down in the Singapore declaration in 1971, and those are the principles of freedom under a rule of law and democracy. The 48 and 49 of us co-operate closely on many matters, especially those mentioned by my hon. Friend such as scientific and technical co-operation and the advice upon education and other matters that we give. We also girdle the world and so have an instant way of seeking local views on any matter which may arise anywhere in the world.
One of the most impressive things about the Commonwealth conference is that it is the only big international conference that I attend which requires no translation or interpretation of any kind, making the debate active, without rancour and very clear. Such an organisation has a great future ahead.

Several Hon. Members: rose——

Mr. Speaker: Order. I have to take into account the subsequent business. We have business questions and a heavy day in front of us. I shall call three more hon. Members from each side and then we must move on.

Ms. Diane Abbott: Does the Prime Minister agree that, notwithstanding her ritual condemnation of apartheid, her performance at Kuala Lumpur demonstrates what everybody, particularly black South Africans, know—that she is and remains, at every international occasion that she attends, an indefatigable fifth columnist for apartheid?

The Prime Minister: Nonsense. As the hon. Lady knows, and as I reminded the Commonwealth conference, when there was naked racialism on the part of some African countries, throwing out the Indians because they were highly successful, it was Britain that took them; a considerable number came to my constituency, where they have been very successful indeed.

Mr. John Carlisle: Does my right hon. Friend agree that, if South Africa did not exist, it would soon be invented by many Commonwealth leaders to cover up the problems in their own backyard, particularly the violation of human rights? Is it not time that we considered leaving that club, the members of which seem intent on inflicting poverty and hunger on those whom they purport to try to represent in South Africa?

The Prime Minister: South Africa exists. It has the strongest economy in Africa. Many people vote with their

feet and go to work in South Africa in order to get a better living there and they remit a good deal of their earnings to the front-line states. If the economy of South Africa were to collapse, the economies of the front-line states would quickly follow. It is important to keep that economy strong and not to cause more poverty. Britain relieves the people who are being fed under Operation Hunger at a cost of £1·3 million and tries to reduce the hardship there; other people seem to wish to increase it.

Mr. Alexander Eadie: With regard to the Prime Minister's strictures earlier about language, her reported statement that she felt sorry for the other 48 members of the Commonwealth may be good language, but would it not be interpreted as supreme arrogance by any Head of State?
Secondly, will the Prime Minister try to clarify the Foreign Secretary's role in relation to the statement? A recorded press interview shows that when the Foreign Secretary was interviewed he did not know anything about the statement that was issued. Will she clarify that, please?

The Prime Minister: Nonsense. The hon. Gentleman saw my right hon. Friend the Foreign Secretary. He is totally and utterly misrepresenting the Foreign Secretary. My right hon. Friend wrote part of the document and we both agreed to issue it. However much the hon. Gentleman tries to use language to counter that, it is not true. We both wrote and we both issued the statement.

Sir William Clark: Does my right hon. Friend agree that some of the Commonwealth countries that are critical of the United Kingdom Government's stance on South Africa have themselves been criticised for their actions in their own countries by the latest report from Amnesty International? Is it not the height of hypocrisy for some of our critics, when their own house is not in order and when there are violations of human rights there, to criticise anybody, whether it be about South Africa or not?

The Prime Minister: I am grateful to my hon. Friend. Four countries in the Commonwealth have states of emergency, and a number do not have democracy at all in our sense of the term. Nevertheless, most of us recognise that it is our task to try to sustain them through periods of difficulty, hoping that they will eventually come through with freedom, the rule of law, full democractic rights and a plurality of parties.

Mr. Pat Wall: The Prime Minister referred to the election of Chief Anyaoku as Secretary-General of the Commonwealth, and a joint declaration against all forms of terrorism. Did she use the opportunity of her visit to Kuala Lumpur to discuss with representatives of the Nigerian Government the introduction of a state of emergency there, and the arrest of trade unionists and other elements of opposition within Nigeria, who have been held without trial and often without charge? Did she raise with Chief Anyaoku the farce of a Government who are calling an election in which they nominate the two parties allowed to stand, and forbid the Nigerian Labour party its right to stand?

The Prime Minister: I did not discuss those particular matters with the Nigerian representatives, but the hon. Gentleman knows that the members of the military


Government have made it quite clear that they will not stand in the democratic elections that they hope will be held fairly soon.

Mr. Ivor Stanbrook: As we are now undoubtedly out of step with the rest of the Commonwealth—old and new—on the question of sanctions against South Africa, is it not all the more important for my right hon. Friend to emphasise Britain's appreciation of the value of membership of this worldwide, multiracial, English-speaking organisation, the source and raison détre of which—fruitfully for us—is the British connection?

The Prime Minister: I agree with my hon. Friend. The origin of the Commonwealth is its historic connection with Britain. It is, after all, the first empire in the world that has finally resolved itself into a commonwealth of friendly nations agreeing to co-operate and help on many matters, and I think that it is extremely valuable and important.

Business of the House

The Lord President of the Council and Leader of the House of Commons (Sir Geoffrey Howe): With permission Mr. Speaker, I should like to make a statement about the business for next week:
MONDAY 30 OcToBER—Remaining stages of the Football Spectators Bill Lords]
Remaining stages of the Brunei (Appeals) Bill [Lords]
TUESDAY 31 OCTOBER—Opposition day (20th Allotted day). There will be a debate on an Opposition motion entitled "The crisis for mortgage payers, tenants arid homeless people".
Motion on the Licensing and Clubs (Amendment) (Northern Ireland) Order.
WEDNESDAY I NOVEMBER—Until 7 o'clock motion relating to the National Health Service (General Medical and Pharmaceutical Services) Amendment (No. 2) Regulations.
Motion to take note of EC document on control of nitrate pollution. Details will be given in the Official Report.
The Chairman of Ways and Means has named opposed private business for consideration at 7 o'clock.
THURSDAY 2 NOVEMBER—There will he a debate on economic and monetary union on a motion for the Adjournment of the House. Details of the EC Documents relevant to the debate will be given in the Official Report.
FRIDAY 3 NOVEMBER—There will be a debate on road safety on a motion for the Adjournment of the House.
MONDAY 6 NOVEMBER—Progress on consideration of Lords Amendments to the Local Government and Housing Bill.

[Relevant documents:

Wednesday 1 November

Relevant European Community Document


(a) 4136/89
Water pollution by nitrates

Relevant Report of European Legislation Committee

(a) HC 15-xiv ( 1988–89), para 2

Thursday 2 November

Relevant European Community Documents


(a) unnumbered
Economic and Monetary Union


(b) unnumbered
Co-operation between Central Banks


(c) unnumbered
Convergence of economic performance


(d) 7550/89
European Currency Unit

Relevant reports of European Legislation Committee

(a) HC 15-xxi (1988–89), para 5
(b) HC I5-xxxv (1988–89), para 2
(c) HC 15-xxxv (1988–89), para 3
(d) HC I5-xxviii (1988–89), para 2]

Mr. Frank Dobson: I thank the Leader of the House for his statement. I also thank him for doing as we asked and providing prime time for the debate on the GPs' contracts, and also for providing a day for a debate on the Delors report on economic and monetary union.
Will the right hon. and learned Gentleman tell us when we are likely to have the report of the Clapham rail crash inquiry? Could he also oblige us by not presenting that report to the House next Tuesday, in an exercise of news


management intended to keep the debate on the housing crisis out of the first items in the television news broadcasts?
Is there any possibility of an early debate on the release of the Guildford Four and associated matters, particularly as at present the case is not sub judice but should any prosecutions commence it would become so? Can the Leader of the House guarantee that there will be no more instant guillotines announced next week? In particular will he ensure that no more business statements are made without proper notice being given to the Opposition?

Sir Geoffrey Howe: I thank the hon. Gentleman for his appreciation of the arrangements made through the usual channels for handling the debate on general practioners' contracts and on economic and monetary union. My right hon. Friend the Secretary of State for Transport proposes to make a statement on the Clapham report shortly. I had not thought of the idea that the hon. Gentleman suggested, but I will bear it in mind. I cannot give the hon. Gentleman an answer on when there will be a debate on the Guildford Four, but I shall certainly look into the matter.
On the hon. Gentleman's final point, I shall have to make, at whatever time and stage it is necessary, whatever arrangements are needed to secure the continued dispatch of the business before the House. I regret that, owing to a misunderstanding, when I intervened last night in a move to report progress—I intended at the same time to make some proposals about the remainder of business—the normal conventions for giving notice were not observed. I apologise for that to the hon. Gentleman and to the other parties. However, the substance of the matter has been for the convenience of the House and such matters may have to be considered again.

Mr. Nicholas Winterton: Although I fully appreciate the pressure of business facing the Government, it is extraordinary that in the statement on the Commonwealth conference no question was put on a matter which is perhaps more relevant than any other—the independence process in Namibia. Will my right hon. and learned Friend find time for either a debate or for a Government statement, where an assurance could be given to the House that the United Kingdom Government will insist upon the 1982 principles being adhered to in Namibia and that they will not recommend that the Security Council should recognise any government that may result from the elections in the constituent assembly unless the 1982 principles have been fully honoured?

Sir Geoffrey Howe: I cannot be accountable for topics that hon. Members raise during questioning on statements such as the one we have just listened to. My hon. Friend's interest in Namibia is well known and understood. Of course, Her Majesty's Government are intensely interested in the elections that are to take place shortly in Namibia. We will bear in mind the points that were made by my hon. Friend. I have no doubt that he will be as ingenious as ever in finding other opportunities to express his concern on this matter.

Mr. David Steel: Will the Leader of the House consider an early debate on procedure? Does he recognise that eight Bills this Session have been subject to the guillotine and that there is

growing irritation not just in the House but in the other place and outside? The early clauses of Bills are discussed at inordinate length and the later clauses are discussed hardly at all. That is not a satisfactory way of legislating. Will he look again at a process of voluntary timetabling of major Bills from the beginning?

Sir Geoffrey Howe: I am obviously studying the wide range of proposals that have been made over the years affecting procedures on matters of this kind. However, I cannot promise to come to the conclusion that the right hon. Gentleman urges upon me. The volume of amendments concerned in some of the Bills—for example, the Children Bill—reflect the Government's willingness to respond positively to the wide-ranging debate that has taken place.

Sir Philip Goodhart: My right hon. and learned Friend will be aware that some of us deeply deplore the decision forcibly to repatriate the Vietnamese boat people. Can we have a debate before that depressing decision is implemented?

Sir Geoffrey Howe: I am familiar with my hon. Friend's continuing interest in this matter which he has brought before the House on a number of occasions and which he will no doubt raise again. He must recall that the international community has accepted for some time that all those screened out as non-refugees should be returned to Vietnam. As my right hon. Friend the Prime Minister pointed out earlier, it is increasingly feared that voluntary returns cannot provide a comprehensive solution to the problem. However, I shall bear in mind the points that my hon. Friend makes.

Several Hon. Members: rose——

Mr. Speaker: In view of the hon. Gentleman's letter to me, I call Mr. Anthony Banks.

Mr. Tony Banks: You are very kind to an old man, Mr. Speaker.
Does the Leader of the House agree that dealing with 48 Commonwealth Prime Ministers is a mere doddle compared with dealing with my hon. Friend the Member for Bolsover (Mr. Skinner) during the early watches of the morning?
As the Prime Minister made quite lengthy mention of elephants and elephant ivory and said—and I disagree entirely—that in certain parts of southern Africa there are large elephant populations that should be culled——

Dame Peggy Fenner: Zimbabwe.

Mr. Banks: In southern Africa. Will the Leader of the House please arrange for a statement from the responsible Minister who was in Lausanne for the CITES conference discussing the future of the ivory trade? In view of the fact that in Hong Kong there are so many tonnes of ivory that should be destroyed rather than put on to the market, we must have that debate. There is a great deal of public concern.

Sir Geoffrey Howe: Even in response to a question from the hon. Gentleman after some secret exchange with which he is so pleased, I shall not respond to his invitation to pay tribute to his colleague the hon. Member for Bolsover (Mr. Skinner).
On the serious topic with which the hon. Gentleman is concerned, whatever the differences of opinion, he


appreciates that there are differences between the stocks in certain southern African countries and those in other parts of the world. He also appreciates that Hong Kong's possession of substantial existing stock is different again. Clearly it would be helpful to find an opportunity to debate these matters. I do not know whether we will be able to find such an opportunity, but I shall bear in mind the general point that he raised.

Mr. Jonathan Aitken: Although the House will be grateful for next week's debate on the Delors report on economic and monetary union, that debate is taking place four months after 'the Madrid summit at which we might have had some influence on the Government's thinking had there been a debate at that time. As a former Foreign Secretary with new responsibilities, will my right hon. and learned Friend start to have some sympathy for the point of view that we continually debate European matters either too late in the political process or too late at night and that some reforms in that sphere of parlimentary business really are necessary?

Sir Geoffrey Howe: Having been concerned with such matters from the first moment of introduction of the European Communities Act 1972 and the Foster report which laid the foundations of our present procedure, I fully understand the importance of that point to the whole House. As my hon. Friend knows, it is now being considered by the Procedure Committee, and obviously we shall look forward to the opportunity of considering that report when it is forthcoming.

Mr. Alfred Morris: At Blackpool two weeks ago, the right hon. and learned Gentleman urged his colleagues to do more listening. Will the Government be listening next Monday as Britain's war widows launch their new campaign for justice, a campaign that is massively backed on both sides of the House? Will there be a statement next week and will the Leader of the House put it to his ministerial colleagues directly involved that to listen is to understand and to understand is to want to help?

Sir Geoffrey Howe: The whole House will acknowledge that there is scarcely any group whose case is likely to be listened to with more attention than that mentioned by the right hon. Gentleman. They will certainly be listened to, although I cannot promise what the consequences will be.

Miss Ann Widdecombe: What plans does my right hon. and learned Friend have for a proper parliamentary debate on the implications of and the implementations of the Polkinghorne report?

Sir Geoffrey Howe: I understand my hon. Friend's interest in the Polkinghorne report which was delivered to health Ministers shortly before the summer recess. Given the speed of recent developments, Department of Health Ministers decided that the new code of practice on the use of foetal tissue for research and treatment should be published without dalay. I shall take account of my hon. Friend's expression of interest in the prospect of a debate.

Mr. Jack Ashley: Is the Leader of the House aware that when the proceedings of the House are televised, thousands of deaf people will be deprived of their basic rights to follow them because they

will not be subtitled? Can the Leader of the House help with that urgent matter because we are being televised in a few weeks' time? May we please have a debate next week?

Sir Geoffrey Howe: The point made by the right hon. Gentleman was drawn to my attention in Blackpool two or three weeks ago. It is touched on in the report of the broadcasting Select Committee, and I am examining the matter in the light of those references. I shall do so with more energy in the light of the urging of the right hon. Gentleman.

Mr. Patrick Cormack: May I return to the terrible plight of the haemophiliac AIDS victims? We still have not had a statement from a Minister on the subject. The Government's record is extremely good and they have shown their sympathy in the past, but the plight of these people is desperate. If they have to wait for the courts, they will mostly be dead. May we please have a statement next week?

Sir Geoffrey Howe: The matter has already been drawn to the attention of my right hon. and learned Friend the Secretary of State for Health, and the right hon. Member for Stoke-on-Trent, South (Mr. Ashley) has been asking my hon. and learned Friend the Member for Putney (Mr. Mellor) questions about it. I shall ensure that the point raised by my hon. Friend is drawn to the attention of the Secretary of State.

Mr. Sydney Bidwell: May I draw the right hon. and learned Gentleman's attention to early-day motion 1293?
[That this House welcomes the united efforts of Hertsmere Borough Council and the Hindu community to find an equitable solution to maintain the continuity of Hindu worship presently accommodated at Bhaktivedanta Manor in Hertfordshire; and supports the recognition of very special circumstances as defined in planning law, of the needs of the Hindu community in this case.]
It is an all-party motion on Hindu worship and Hertsmere borough council. If the right hon. and learned Gentleman cannot arrange an early debate, will he draw the matter to the attention of his right hon. Friend the Secretary of State for the Environment, because I understand that the ball is in his court? The matter has been a vexatious problem for several years, but agreement has been reached between the borough council and the Hindu community. Will the right hon. and learned Gentleman kindly assist in this respect?

Sir Geoffrey Howe: I understand the significance of the matter raised by the hon. Gentleman. My right hon Friend the Secretary of State for the Environment is currently considering appeals against an enforcement note order and a discontinuance order made by the council and also two appeals, including one on a temple and other accommodation that will, in part, replace those activities. He expects to announce his decision shortly, taking into account the possibility of there being special circumstances that could override the strong presumption against development in the green belt.

Mr. Tim Smith: May I reinforce what my hon. Friend the Member for Staffordshire, South (Mr. Cormack) said about the haemophiliac AIDS victims and draw my right hon. and learned Friend's attention to early-day motion 1307?
[That this House is gravely concerned by the tragic situation facing 1,200 sufferers from haemophilia who were treated by the National Health Service with the blood product Factor VIII which has subsequently been shown to have been contaminated with the HIV virus; is deeply saddened by the deaths of 100 of these patients who developed full blown AIDS; is seriously worried about the future well being of their families and asks the Government to recognise that the patients are the victims of a medical accident brought about by a lack of knowledge rather than negligence and that they be compensated without the costly, time-consuming process of law during which many of them may die.]
This is, by definition, an urgent matter. I very much hope that it will be possible for the Government to make a statement in this Session.

Sir Geoffrey Howe: I understand, if only for the reason that the point has been raised with me by hon. Members at each of my appearances at business questions, that there is widespread feeling about this matter, and that by definition there is a degree of urgency about it. As I have said already, I shall draw the matter to the attention of my right hon. and learned Friend the Secretary of State for Health.

Mr. Alex Salmond: After the Leader of the House left us this morning, he may be aware that the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food told the House that a decision on a decommissioning scheme for the fishing industry would be made before Christmas. Given that statement, should we not have a debate in Government time on this most urgent matter so that the House can fully explore the role of the Minister of Agriculture, Fisheries and Food in blocking and sabotaging proposals for a decommissioning scheme emanating from the Scottish Office? I am sure that the Leader of the House will be aware of the urgency of the position, given the crisis in the fishing industry in Scotland. I hope for a favourable reply.

Sir Geoffrey Howe: I cannot give an undertaking about the prospect of a debate in any particular form. I can confirm what was implicit from what was said from the Dispatch Box last night—that this is an urgent matter and that the Government are urgently considering the measures necessary to deal with it.

Mr. Charles Wardle: My right hon. and learned Friend may recall a debate on drug abuse on the motion for the Adjournment of the House on 21 July. Will he consider finding time for another such debate before long, perhaps early in the new Session, to concentrate on the growing and terrible menace of crack? Does he agree that crack not only ruins the lives of those who succumb to it but threatens the public with a spiral of violence by addicts, who need money to buy it? Should not the House continue to give the matter the closest possible attention?

Sir Geoffrey Howe: I cannot undertake to arrange a debate on the topic at any particular time. My hon. Friend is entirely right about the need to keep this desperate problem well to the fore of our agenda.

Mr. Stuart Bell: In view of the exchanges that we have just had on the Prime Minister's statement on Kuala Lumpur, will the Lord President of the Council promise us an early debate on the Commonwealth, because we had some interesting exchanges with the Prime Minister and her Back Benchers? In the debate, it would be interesting to elucidate what she meant when she got on the plane and said to a Daily Mail reporter, "1 think they are jolly lucky that we colonised them, not someone else." It may be that during the debate we should be able to elucidate what the Prime Minister meant by that remark.

Sir Geoffrey Howe: The hon. Gentleman will be able to regale the House with this interrogation when my right hon. Friend has the opportunity to discuss this topic in. for example, the debate on the Gracious Address.

Mr. Rupert Allason: Will my right hon. and learned Friend try to find time for a full debate on the laws of defamation? Several recent events have caused grave disquiet, not just in the legal profession but in the world of journalism. I refer in particular to two recent decisions, one of which was the decision by my right hon. Friend the Home Secretary to prevent two retired intelligence officers from giving evidence in a libel case. At the same time he is allowing a retired intelligence officer to bring a libel case against a senior academic. We need a debate at the earliest possible moment to clarify the Government's policy on this issue.

Sir Geoffrey Howe: I cannot comment on any security matters raised expressly or by implication in my hon. Friend's question. On the wider matter of press relations with the rest of society, no doubt there will be opportunities as the year's business proceeds to discuss these matters.

Mr. Harry Ewing: May I raise with the Leader of the House a serious and important matter involving the Scottish Office? Will he arrange for a statement to be made next week as a matter of urgency, preferably by the Prime Minister in her role as head of the Civil Service? The Secretary of State for Scotland, through his private secretary and, I understand, with the support of the permanent under-secretary, has given an instruction that all background and discussion documents on Government policy must be sent to the chairman of the Conservative party in Scotland whose office is in Chester street, Edinburgh. Does not the Leader of the House see a serious and dangerous situation in that? If the chairman of the Tory party in Scotland is to get all these documents, why should not the chairmen of the Labour and Scottish National parties and of the Liberal Democrats—all of which are represented in the House—get them also?
I put it to the Leader of the House that, once these lines of communication are open between senior civil servants in the Scottish Office and Tory party headquarters and its chairman at Chester street, Edinburgh, it will be difficult for the incoming Labour Government and their Ministers. once they go into New St. Andrew's house, in a few years' time, to have any confidence that those lines have been closed.

Sir Geoffrey Howe: The hon. Gentleman must understand that the chairman of the Conservative party in Scotland is a member of Her Majesty's Government and receives communications about matters in that capacity.


The other office holders whom the hon. Gentleman mentioned—the chairman of other political parties—are not, and I hope for a very long time that they will not hold that position.

Mr. Harry Greenway: I support the call by the hon. Member for Newham, North-West (Mr. Banks) for a debate or statement on the future of the ivory trade. Could such a debate be wide enough to take account of the fact that elephants in some areas are nearly extinct?
May we also have a proper debate on sanctions against South Africa rather than short statements, such as the one that we have had this afternoon, which do not allow all hon. Members who wish to speak to do so? Could such a debate be wide enough to take account of the views recently expressed by Mr. Jim Baker, the United States Secretary of State who said that further sanctions against South Africa would he inappropriate at the present time and that we should support my right hon. Friend the Prime Minister in her support for President de Klerk as the best means of moving South Africa towards an improvement?

Sir Geoffrey Howe: My hon. Friend has made such an all-embracing set of observations on that topic that I doubt the need to provide any further special occasion to discuss them.

Mrs. Ann Clywd: Will the Leader of the House consider having an early debate on Government policy on Cambodia? There was yet another example of double-speak at the Kuala Lumpur conference. The Prime Minister signed a communiqué on the section on South-East Asia which clearly stated the right of the Cambodian people to determine their destiny without foreign interference. At the same time, Jane's Defence Weekly says the United Kingdom has been training Cambodian guerrillas at four secret bases in Thailand over the past four years. Given the great public interest in this subject, people have a right to know exactly where the United Kingdom Government stand on this issue.

Sir Geoffrey Howe: Although the hon. Lady may have difficulty in securing any very large space in it, there is to be an Adjournment debate on this topic on Wednesday next week. I shall draw the attention of the Minister who is to reply to that debate to the point that she has made.

Mr. Stephen Day: Incitement to murder is still a criminal offence in Britain as I understand it. Therefore, will my right hon. and learned Friend make it possible for the Home Secretary to make a statement as to why certain leaders of the Moslem community have remained immune from prosecution under that law and allow the House to express the view that I am sure will be supported by right hon. and hon. Members on both sides, that such incitements to murder have no place in a multi-religious, multicultural and multiracial free society?

Sir Geoffrey Howe: The whole House will readily agree with my hon. Friend that incitement to murder should not be tolerated in any society, and certainly not in our own. However, for action of the kind that my hon. Friend has in mind to be taken, a decision has to be made, not by the Home Secretary or any other Minister, but by the prosecuting authorities, who are, no doubt, considering the matter.

Mr. Jeremy Corbyn: Further to the reply that the Leader of the House gave to my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson), will he be more specific about when a debate could be held on the innocence of the Guildford Four and the Guildford and Woolwich pub bombings, on the methods that the police used to obtain confessional evidence on which the convictions were made, why that information was not made available to defence lawyers or anybody else during the past 15 years, and the practice of the police investigating the police when malpractice appears?
We should also discuss the operation of the Prevention of Terrorism Act 1974, bearing in mind that my constituent Paul Hill has just been released after serving 15 years for a crime that he did not commit and that he was the first person to be accused under that Act. Does the Leader of the House agree that a debate on these matters is urgent and important in view of the miscarriages of justice that have taken place?

Sir Geoffrey Howe: I am not able to offer any conclusion about a proposal for a Government debate of that kind. It is clearly a matter that could he considered by the official Opposition as a topic for debate if they so wish. I shall draw the hon. Gentleman's point to the attention of the Home Secretary.

Mr. Bob Cryer: Will the Leader of the House press the Secretary of State for Trade and Industry to make a statement next week on the Department's response to the Silberston report on the multi-fibre arrangement? The Government do not seem to be sufficiently seized of the serious nature of this report, which affects the clothing and textile industry which employs almost 500,000 people. In Bradford that industry employs about 14,000 people in wool and textile mills. The phasing out of the multi-fibre arrangement, which has been suggested by Professor Silberston, would put their jobs in jeopardy. The report suggests the loss of about 33,000 jobs and it is causing a good deal of concern among workers who have been most helpful and co-operative for many years in the development of the industry. I hope that the Leader of the House will press the Department for a statement so that we can ask questions about it.

Sir Geoffrey Howe: The hon. Member understands that Professor Silberston's report on the implications of the multi-fibre arrangement for the United Kingdom economy represents the professor's own view. That does not mean that it is not helpful to the Government and others when they are considering this issue. However, I cannot undertake to find Government time for consideration of the report before the House prorogues. I have little doubt that there will be a chance to consider it once we return.

Mr. Dennis Skinner: Is the Leader of the House aware that when he had to come to the House to change Government business last night, after midnight, some people said—hon. Members on both sides of the House but particularly Opposition Members—that he had been left holding the baby because of the Whips' inability to keep the troops in? As the right hon. and learned Gentleman probably now knows, the Government have to have 100 people in the Chamber to close a debate. The Leader of the House had to come and pick up the pieces.
One of the bones of contention in that debate, apart from the legislation itself, which is in a tidy old mess, is that the Associated British Ports (No. 2) Bill is scheduled for consideration next week. It is on——

Mr. Speaker: Order. That is the business for next week——

Mr. Skinner: It is on next week, on Wednesday, after 7 o'clock.

Mr. Speaker: But I do not think it was announced——

Mr. Skinner: Sometimes this place is in a hubbub and I know that you cannot hear everything, Mr. Speaker. I know that you turn a deaf ear to some of the words and expletives that are used as well—[HON. MEMBERS: "From the Tory Benches".] If the present Leader of the House had done what the last one did and had had consultations with interested parties about this flawed Bill which had as its chairman an adviser to the British Chemical Engineering Contractors Association, which had some connection with the promoters of——

Mr. Speaker: Order. Yes, but it is indeed set down for business next week and that is the time to make these comments.

Mr. Skinner: But, I mean, the lad is new and I am trying to put him in the picture and explain why the Bill ought to be taken off. If the Government want the Bill they should start it again next year. If the Leader of the House does that he will make a more promising start and he might not get dragged out of bed after midnight.

Sir Geoffrey Howe: The Chairman of Ways and Means, as the hon. Gentleman knows, has identified the Bill to which he referred for discussion in opposed private business at 7 o'clock next week. During the discussions I have learnt quite a lot about this interesting piece of legislation and I have no doubt I shall learn more next Wednesday, possibly even from the hon. Gentleman. He has not enlightened me greatly in his discussion of last night's proceedings because despite his lurid expectations, my right hon. and learned Friend the Chief Whip had a well-manned majority in the House. [Interruption.]

Mr. Speaker: Sir Geoffrey Howe.

Companies Bill [Lords]and Children Bill [Lords] (Allocation of Time)

The Lord President of the Council and Leader of the House of Commons (Sir Geoffrey Howe): rose——

Mrs. Alice Mahon: On a point of order, Mr. Speaker.

Mr. Max Madden: On a point of order, Mr. Speaker.

Sir Geoffrey Howe: I beg to move——

Hon. Members: On a point of order.

Hon. Members: On a point of order.

Mr. Speaker: What is the point of order?

Mr. Madden: Earlier this afternoon the Home Secretary was invited to apologise for the gross miscarriage of justice experienced by the Guildford Four. Mr. Speaker, you will have heard that he gave what must have been the most graceless apology for what is clearly a serious miscarriage of justice. At the time, justified protests were made. My point of order is that the Guildford Four are in the process of submitting claims for compensation for the miscarriage of justice that they have suffered, and the view that was expressed this afternoon on their conviction may influence the amount of compensation awarded.

Mr. Speaker: Yes, but that is not a matter for the Chair or for order in the House. I said at the time, and I took the points of order at the time because they arose immediately out of the answer to that question, that it is a matter not for me but for the Government.

Mrs. Mahon: On a point of order, Mr. Speaker. Earlier this afternoon the Home Secretary informed my hon. Friend the Member for Huddersfield (Mr. Sheerman) that I had given my unreserved support to the so-called women's safety charter. He was referring to a press report in which I make it quite clear that I do not give that charter unreserved support. I accuse Ministers of using the charter to obscure their failure to tackle the root causes of violence against women. It is important that Ministers of such high rank do not misrepresent matters.

Mr. Speaker: Again that is not a matter for me.

Mr. Tim Devlin: On a point of order, Mr. Speaker.

Mr. Speaker: We have already started on the timetable debate.

Mr. Devlin: This is an important matter.

Mr. Speaker: Very well.

Mr. Devlin: May I refer you to column 871 of yesterday's Hansard Mr. Speaker in which the right hon. Member for Swansea, West (Mr. Williams) referred in a point of order to part-time Tory Members, following a point of order that I raised at 4.45 pm. Can you advise me, Mr. Speaker, as a relatively junior Member of the House—in fact a very junior Member—whether it is in order for one hon. Member to refer to another as a part-time


Member when the hon. Member who did the calling has a worse voting record and was referring to an occasion when he too was absent?

Mr. Speaker: We must never attribute any dishonourable actions to each other in this House, but being called a part-time Member does not quite come within that category and it is not an issue in this debate, which has already started.

Mr. Alan Williams: Further to that point of order, Mr. Speaker. I do not want to upset a new Member of Parliament. My comment may have caused him embarrassment in his constituency, but I must point out to him that what was said in the course of heated debate was not meant to cause him any personal harm or embarrassment. In his particular case, I withdraw my comment.

Sir Geoffrey Howe: I beg to move,
That the following provisions shall apply to the remaining proceedings on the Companies Bill [Lords] and the Children Bill [Lords]:—

Report and Third Reading

COMPANIES BILL [Lords]

1—(1) The proceedings on Consideration and Third Reading of the Companies Bill [Lords] shall be completed in one allotted day and shall be brought to a conclusion at the Times shown in the following Table:—


TABLE


Proceedings
Time for conclusion of proceedings


New Clauses, new Schedules and amendments relating to Parts I to IV of the Bill.
9.50 pm


New Clauses, new Schedules and amendments relating to Part V of the Bill.
11.00 pm


New Clauses, new Schedules and amendments relating to Parts VI and VII of the Bill.
Midnight


Remaining new Clauses and amendments and Third Reading.
1.00 am

CHILDREN BILL [LORDS]

2. The proceedings on Consideration and Third Reading of the Children Bill [Lords] shall be completed in one allotted day and shall be brought to a conclusion three hours after the commencement of adjourned proceedings on consideration.

Dilatory Motions

3. No dilatory Motion with respect to, or in the course of proceedings on either Bill shall be moved except by a member of the Government, and the Question on any such Motion shall be put forthwith.

Order of proceedings

4. No Motion shall be made to alter the order in which proceedings on Consideration of either Bill are taken.

Extra time on allotted days

5. Paragraph (1) of Standing Order No. 14 (Exempted business) shall apply to the proceedings on both Bills.

Conclusion of proceedings

COMPANIES BILL [LORDS]

6.—(1) For the purpose of bringing to a conclusion any proceedings on the Companies Bill [Lords] which are to be brought to a conclusion at a time appointed by this Order and which have not previously been brought to a conclusion, Mr. Speaker shall forthwith put the following Questions (but no others)—
(a) any Question already proposed from the Chair;
(b) any Question necessary to bring to a decision a Question so proposed (including, in the case of a new Clause or new Schedule which has been read a second time, the Question that the Clause or Schedule be added to the Bill);

(c) the Question that all new Clauses standing in the name of, or moved by, a member of the Government and all new Schedules standing in the name of a member of the Government be added to the Bill;
(d) the Question that all remaining amendments standing in the name of, or moved by, a member of the Government be made to the Bill;
(e) any other Question necessary for the disposal of the business to be concluded.

(2) Proceedings under sub-paragraph (1) above shall not be interrupted under any Standing Order relating to the sittings of the House.

CHILDREN BILL [LORDS]

7.—(1) For the purpose of bringing to a conclusion any proceedings on the Children Bill [Lords] which are to be brought to a conclusion at the time appointed by this Order and which have not previously been brought to a conclusion, Mr. Speaker shall forthwith put the following Questions (but no others)—
(a) any Question already proposed from the Chair;
(b) any Question necessary to bring to a decision a Question so proposed (including, in the case of a new Clause or new Schedule which has been read a second time, the Question that the Clause or Schedule be added to the Bill);
(c) the Question that all new Clauses and new Schedules standing in the name of a member of the Government be added to the Bill;
(d) the Question that all remaining amendments standing in the name of a member of the Government be made to the Bill;
(e) any other Question necessary for the disposal of the business to be concluded.

(2) Proceedings under sub-paragraph (1) above shall not be interrupted under any Standing Order relating to the sittings of the House.

Supplemental orders

8.—(1) The proceedings on any Motion moved by a member of the Government for varying or supplementing the provisions of this Order shall, if not previously concluded, be brought to a conclusion one hour after they have been commenced, and paragraph (1) of Standing Order No. 14 (Exempted business) shall apply to the proceedings.

(2) If the House is adjourned, or the sitting is suspended, before the time at which proceedings on either Bill are to be brought to a conclusion under this Order no notice shall be required of a Motion moved at the next sitting by a member of the Government for varying or supplementing the provisions of this Order.

Saving

9. Nothing in this Order—
(a) prevents any proceedings to which it applies from being taken or completed earlier than is required by the Order; or
(b) prevents any business (whether on the Bill in question or not) from being proceeded with after the completion of all such proceedings on that Bill.

Re-committal

10. No debate shall be permitted on any Motion to re-commit either Bill (whether as a whole or otherwise), and Mr. Speaker shall put forthwith any Question necessary to dispose of the Motion, including the Question on any amendment moved to the Question.

Interpretation

11. In this Order "allotted day", in relation to the Companies Bill [Lords] or the Children Bill [Lords] means any day on which that Bill is put down as first Government Order of the day, provided that a Motion for allotting time to the proceedings on the Bill to be taken on that day either has been agreed on a previous day, or is set down for consideration on that day.
The House does not need me to remind it that it is fundamental to the way in which the House operates that the elected Government are entitled, on reasonable terms, to look to the House for the passage of their business. That does not mean that we do not have a responsibility to listen to the points made by hon. Members of all parties. In the case of these two Bills, we have been listening with great


care, and that has been reflected in many amendments designed to improve and clarify the two measures. We also have a responsibility to respect the right of hon. Members of all parties, including, of course, the official Opposition, to debate and challenge the Government's legislation.
In the case of the Companies Bill and the Children Bill, it cannot be argued that the Opposition, or indeed the whole House, have not been given that chance. We have almost completed consideration of both measures and it would be most unwelcome to many outside the House if the Government were to allow the Bills to be put at risk at this late stage, when they have been successfully piloted to this stage with the agreement of the House at each stage.
At about this time last year, the House agreed to a somewhat similar approach by my predecessor, when a timetable was put on the last stages of the School Boards (Scotland) Bill and the Housing (Scotland) Bill to ensure that those important measures would be allowed to complete their passage. My motion today is in no sense unprecedented and it is even more justified in light of the way in which progress on these Bills has been delayed.

Mr. Bob Cryer: Will the Leader of the House tell us how many amendments there were to the Bills that he has just cited as precedents? Were there more than the 1,000 Government amendments on the Companies Bill or the 400 amendments on the Children Bill? Surely it is the weight of Government amendments that has caused the difficulties. The Government have not provided adequate time for scrutinising the many, often complicated, amendments to two complicated Bills.

Sir Geoffrey Howe: That is not the substance of the matter. In the case of the Children Bill, the overwhelming majority of the amendments were tabled, as my hon. and learned Friend the Minister of State pointed out in the course of the debate earlier this week, in response to representations made by organisations outside the House and by the Opposition. During the period when the matter was proceeding normally, amendments were considered and disposed of by the hundred and dozens were dealt with each hour. That was no obstacle to progress and was a sensible way to handle matters in response to the wishes of the House. It is a matter of particular regret that we have been unable to make the good progress that was not merely expected but actually being achieved on the Children Bill.
The Children Bill is the most comprehensive and far-reaching reform of this branch of the law ever introduced. It meets a long-felt need for a comprehensive and integrated statutory framework to ensure the welfare of children. The establishment of a new statutory scheme to protect children in emergencies is particularly important and it was introduced in response to the Cleveland and other tragedies involving child abuse. Nobody doubts that and it has been made clear by Opposition speakers that, although there are disagreements on points of detail, the Bill commands wide support in the House. That was made apparent in Committee, when my hon. and learned Friend the Minister of State, a man who is not always given to high exhilaration, described his time in Committee as a "happy experience" and hon. Members will know that that cannot be said of all Committees. In 16 Committee sittings which considered 439 amendments, the Committee

divided only seven times. Many amendments made were designed to ensure that the Bill continued to command an overwhelming measure of cross-party support.
When the Bill returned to the Floor of the House on Monday, the House was content to consider 290 amendments in eight and a half hours with only one Division. In the first 23 minutes, we completed consideration of the first 53 clauses and in that time only two Opposition Members spoke. Until that point, proceedings on the Bill had been characterised by a mass of common sense.
The question is why it was then thought necessary to divide at the first opportunity on Tuesday night—a Division in which 183 hon. Members voted in favour and none against. The House knows why that Division took place and the hon. Member for Monklands, West (Mr. Clarke) was kind enough to put it on record for the House. The Division was obviously not related to opposition to the clause because the hon. Member for Monklands. West said:
The Front Benches have endeavoured to co-operate to ensure that the Bill reaches the statute book."—[Official Report, 24 October 1989; Vol. 158, c. 806.]
He went on to explain that other hon. Members representing mining areas felt it necessary to demonstrate because of their feelings that they had a grievance. It was not related to the Children Bill which, as he said, every hon. Member, including the Opposition Front Bench, supported.
The hon. Member for Monklands, West was kind enough to observe that I was a "reasonable man" and I am content to accept that description for the purposes of this presentation. However, I could not easily sustain that reputation if I were to tell the public and the organisations that have devoted thousands of hours to working for and improving this measure that the Bill was to be lost as a result of a grievance quite unrelated to this necessary and widely expected Bill.
We have already spent 12½ hours this week on Report, as well as five and a half hours on Second Reading debate and 39 hours in Committee. It would be a tragedy for the Bill to be lost at this stage after so much hard work and, above all, after such a welcome measure of co-operation.

Mr. Madden: As an hon. Member who was here on Tuesday night and Wednesday morning and was, with other hon. Members, eagerly awaiting the passage of the Children Bill, which we widely support, may I ask the Leader of the House to explain why, at 1.30 am, it was the Minister of State who moved the adjournment of consideration of the Bill, which was then debated for half an hour? There was a Division at 1.55 am in which 110 Conservative Members voted to adjourn the business while 22 hon. Members—all Labour—voted against adjourning the business. We were perfectly happy, as we made clear several times, to stay here all night and through the next morning to ensure that the Bill was carried. The protests of the Leader of the House ring extremely hollow. This is the most cosmetic controversy that the House has known for a considerable time.

Sir Geoffrey Howe: The hon. Gentleman is not quite so simple as he sounds. He knows the background to those events perfectly well. The whole House, in line with the agreements and understandings made through the usual channels, was expecting to proceed to a conclusion on the matter that night. The hon. Member for Monklands, West


was as startled and dismayed as every other hon. Member by what happened. It was wholly sensible, and made more sensible by the events the hon. Member for Bradford, West (Mr. Madden) has described, to move to next business at that stage so that we could get to the stage that we have now reached.
The Companies Bill, as the House knows, is aimed primarily at creating an up-to-date framework of company law within which enterprise can flourish and it also provides the necessary safeguards for investors and creditors. It contains provisions to implement European Community directives on consolidated accounts and the regulation of orders, both of which have to be implemented by the end of this calendar year, and it also includes certain reforms to ease the statutory requirements on companies. The Bill also contains a number of other less important but significant provisions.
In this case, some of the provisions are undeniably politically controversial, in contrast to those in the Children Bill. Others, as always with companies legislation, are technical. Even so, good steady progress was made in Committee, when about 600 amendments were considered over 15 sessions. Four hundred amendments were accepted by the Government, the level of debate was generally constructive and there was no evidence of what might be called obstructive tactics. In other words, the Bill was duly and carefully considered, sensible amendments were made and it came back to us for those changes to be confirmed. Sadly, last night we moved into a wholly different story.
Until 9 pm we had had three lively but well-contested debates on the areas of prime political controversy in the Bill. That was entirely as expected and reflected the interest of hon. Members on both sides in such matters as political donations. What followed was less edifying and, in some respects, rather strange. Only three of the remaining groups of amendments were considered during the next two hours simply because Divisions were forced by Opposition Members on each and every amendment as it came before the House.
That those Divisions were scarcely motivated by any consideration of the substance or merit of the amendments was demonstrated not just by the lack of any debate, but by the nature of some of those which attracted such unexplained opposition. That conduct was extremely strange, especially as two of the amendments, nos. 13 and 14, on which Opposition Members forced Divisions were tabled to fulfil pledges specifically given to the Opposition in Committee. I commend to the House the view that that underlies the conclusion that the Opposition Front Bench has now entirely lost control of its ability to co-operate in managing the business of the House. It is difficult to see more convincing evidence of that than that provided by the Divisions on those amendments.
In the face of those circumstances, the motion will allow more time for consideration of the remaining amendments than was in prospect under earlier arrangements that Opposition Members failed to deliver.

Mr. Nicholas Bennett: Will my right hon. and learned Friend give the Labour deputy Chief Whip the opportunity to explain why he voted against an amendment which merely replaced the word "part" with "section"?

Sir Geoffrey Howe: It is for the hon. Gentleman to explain that remarkable proposition. There will be ample time for further explanation to be forthcoming as the timetable motion has been carefully drafted to allow sufficient time for the Opposition to make their points—even points as important as the difference between "part" and "section"—provided that they do so with a normal degree of reason and restraint. There is the opportunity to spend additional time on the Companies Bill if we finish this debate in less than three hours.
I am sure that many hon. Members would agree that the time would be better spent on further consideration of the Bill than on debating the merits of this unarguably sensible and necessary measure. The amount of time available will increase for every minute that can be shaved off the debate on the motion. If the Opposition are truly interested in debating the Companies Bill, they will save their powder for later. I urge them to do so and I commend the motion to the House.

Mr. Frank Dobson: What a mess the Government are in.
The speech we have just heard is nothing more than a confession of failure and an acknowledgement that the Government have totally mismanaged their business. The Government have an overall majority of almost 100 and they have a majority of almost 150 over Labour. Now they are reduced, however, to having to introduce more guillotines in one Session than at any time in the history of parliamentary Government.
What a sad spectacle the Leader of the House presents today. When he took up his present job he told a BBC audience:
I think the Government as a whole needs the support of somebody of my experience, particularly when we are facing a new round of problems on the home front".
The right hon. and learned Gentleman was putting himself over as a sort of philosopher king in Hush Puppies. Later briefings to newspapers suggested that, relieved of the pressing demands of the Foreign Office, he would abandon his usual abrasive image and would be able to stand back from the day-to-day hurly-burly to take a strategic overview and to steer the SS Thatcher to calmer waters by his characteristic delicate touch on the tiller. What went wrong? What happened to the long view? What has happened to all that wisdom and experience? As soon as we have a few votes late at night and a few demoralised Tory Back Benchers refuse to stay up to do their duly, blind panic sets in.
Last night, as we awaited the chimes at midnight, the deputy Prime Minister shuffled into the Chamber—or so I am told, as I was in the Tea Room at the time——

The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Eric Forth): Why?

Mr. Dobson: I was contemplating the advice given in Hamlet:
It has now struck 12; get thee to bed Francisco
I thought that we would all be better off in bed apart from those enthusiastic people who wanted to discuss the Bill. The deputy Prime Minister, however, shuffled into the Chamber to announce that the Government would guillotine the Children Bill and the Companies Bill. Such was their panic that the Government business managers could not even find time to follow the convention of this


place by warning the Opposition that they intended to change the business. To be fair, the Leader of the House apologised for that in business questions today. I thank him, and accept his apology.
I am not sure what will happen now the Prime Minister has got home. If she complains that she has come back to a legislative shambles, I suggest that the right hon. and learned Gentleman should tell her not to pick on him as that shambles only imitates the shambles in Kuala Lumpur and the general shambles in Nos. 10 and 11 Downing street.
It is unfair to blame the new Leader of the House for much of this. He inherited this fine mess from his predecessor and from the Government Chief Whip, who appears to be absent at the moment. The Leader of the House must be rather daunted as he gradually discovers just how badly the Government business has been managed since the election. In case his colleagues have not entirely come clean, I shall spell out the facts.
The Government have an overall majority of almost 100. After the 1987 general election, the first Session of Parliament stretched from June 1987 until November 1988, a total of 218 sitting days—the fourth longest this century. With that majority and all that time, the Government got through just 49 Government Bills. The average for the first Session of a Parliament is 70, and the record is 104. For the Government even to achieve that measly total of 49 meant that they had to guillotine six Bills—one more than in any Session in this century.
The Government preach efficiency and improved output to everyone else, but, this year, their productivity has been even worse. This Session is likely to last for about 175 days, yet the number of Government Bills is likely to total just 37 and that will be the lowest number of Bills passed in an ordinary Session in an ordinary year since the second world war.—[HON. MEMBERS: "Hear, hear."] The shirkers on the Conservative Benches are cheering their own incapacity. To make things absolutely clear, those 37 Bills include four consolidation measures which usually go through on the nod. I say usually, as there is one in the House of Lords at the moment.

Sir Geoffrey Howe: The hon. Gentleman might like to swap a quotation from Hamlet with a quotation from Tacitus, who prudently said that his society, whereas it formerly suffered from crimes, had come to suffer from laws. That is why the Government believe in less law and not more.

Mr. Dobson: I am sure that everyone will recognise that the Government is led by a sub-Tacitus. She believes that we do not have a society. We certainly have more crime, but, apparently, in response to that we shall have fewer laws.
The Leader of the House should get things sorted out because, until fairly recently, Mr. Bernard Ingham and people from the right hon. and learned Gentleman's predecessor's office were constantly briefing the press—people who are not easily misled—about the massive load of legislation that they were pushing through. That was done in an effort to convince Tory Members that they should turn up at night and vote occasionally.

Mr. Cryer: Although the boasts of the Leader of the House about the reduction in the amount of legislation

passed reverberate through our deliberations with such dynamism, will my hon. Friend bear in mind that the number of statutory instruments which the Government are pouring out has increased year by year? This is the Government who threatened to take legislation off our backs. They are simply using the Chamber to hand over power to Ministers so that they can oppress us even more.

Mr. Dobson: What my hon. Friend says is certainly true. He has had rather more experience of this than most hon. Members, because he chairs two Committees on Statutory Instruments. Indeed, my hon. Friend is, rightly, so concerned about this problem that he has been involved in organising an international conference so that hon. Members from this House can meet people from other legislatures to see what we can do about improving our scrutiny of statutory instruments. That should be a good development. I only hope that we learn a little from other members of the Commonwealth at the conference with which my hon. Friend is involved, even if we cannot learn in Kuala Lumpur.
The Government have already used a guillotine on six Bills. Even before today, they had repeated the record total. However, they now propose to guillotine two more Bills, setting a new record of eight guillotined Bills in one Session. The Prime Minister sometimes says, "Winston did this; Winston did that," so I have been checking what Winston did. In this one Session of Parliament, the Government will have used guillotines on more Bills than the Churchill and Eden Governments used in total, in the period of their combined Prime Ministerships. Turning to a slightly more up-to-date Tory Government, the Heath Government used a total of only five guillotines in four years.
So what about the guillotines that are proposed today? One applies to the Children Bill, which, as the Leader of the House pointed out, has all-party support for most but not all of its provisions. Probably the most important point that I can make about the Children Bill is that, on Tuesday night, after the Division to which the Leader of the House referred, we had a debate from just before 11 pm to 1.18 am on proposals covering the registration and regulation of day care facilities. As my hon. Friend the Member for Durham, North-West (Ms. Armstrong) said, that matter is central to the protection of children. That was a serious and well-argued debate in which hon. Members of all parties participated, at the end of which the Minister did not criticise what any hon. Member had said—nor did he suggest that any hon. Member had wasted time.
There was then a vote, in which other Opposition parties, apart from the Labour party, joined Labour Members to try to put that important new clause on the statute book. The Government—as they are entitled to do—voted it down. However, as soon as the Division on that important matter was over—at the end of that careful and well argued debate—the Minister of State jumped up and said that he wanted the House to adjourn, and used the Government's majority to push through the adjournment. The Government adjourned their own business.

Mr. Keith Vaz: I served on the Standing Committee on the Children Bill and spoke at 2 o'clock this morning to pay tribute to the work of the Minster of State, Department of Health. I pointed out that


hon. Members of all parties wished to proceed with the Bill in a spirit of all-party agreement because it is very much a consensus Bill.
Early on Tuesday morning, my hon. Friend the Member for Middlesbrough (Mr. Bell) and I pressed the Minister to continue with the debate in that sitting. We said that we did not feel it appropriate that the sitting should be adjourned, and were happy to stay on to complete our consideration of the outstanding matters in the Bill, such as those relating to grandparents' rights and wardship. We did so because we felt that those issues were important and we wanted to retain the consensus felt about the Bill. We did not want our consideration of it to end in this squalid way.

Mr. Dobson: I believe that the Minister of State intends to reply to this debate, so perhaps he will explain his activities. However, I should explain that adjourning our consideration then means that 232 new clauses and amendments remain to be dealt with. Since that point, the Government have not approached the Opposition to ask us to agree to any informal timetable so that we can get the remaining parts of this important Bill through the House. Instead, they have insisted on this guillotine motion which, at most, provides 180 minutes to debate those 232 new clauses and amendments. That works out at about 46 seconds for each provision. The Government's actions are treating the Children Bill with contempt. I am not suggesting that the Minister of State who has been pursuing the Bill through Committee is party to all this, because I suspect that he is embarrassed by it.
I turn now to the Companies Bill. When the Bill was first presented, it was put before the House as the sort of measure that could be commended on Second Reading—as I recall, it had its Second Reading late at night—and as a worthwhile measure that should be passed and made company law. However, since then, over 1,000 amendments have been tabled, mainly by the Government. About 250 of them remain to be considered, of which all but four are Government amendments, for which the Government's guillotine provides about four and a half hours. According to my calculations, that works out at about 64 seconds per amendment, which is marginally better than the Government are providing for the remaining amendments to the Children Bill.
However, that does not provide much time for us to scrutinise carefully the important aspects of a Bill that covers exployees' rights, mergers and the technicalities of company accounts. God knows, nearly all the fraud in the City takes place because the present legislation was not carefully enough drafted or scrutinised. We should ensure that the stuff we are considering now is up to the task. Those are the restrictions that the guillotine motion will impose. It is symbolic that more time will be provided for the completion of the Companies Bill than for the completion of the Children Bill.
Most of the Government's problems spring from their arrogance. They are arrogant not only abroad but at home. They have certainly displayed arrogance over their legislative programme. Generally speaking—I exclude the Children Bill from this description—the genesis of the Government's legislative programme goes something like this. They come up with some half-baked idea from a Right-wing think tank. The idea gets a standing ovation at the Tory party conference. It is then brought back from Blackpool or Brighton and goes to Whitehall, where some

hapless parliamentary draftsman is expected to turn lunacy into workable law. A Bill is produced. It is inevitably full of contradictions and riddled with inconsistencies and is incapable of reflecting what happens in the real world. Comments are then made about it by practical people in the real world and points are raised in Committee by my assiduous hon. Friends, and even by some Conservative Members. At that point, Ministers realise that they need to amend the Bill——

Mr. Tim Smith: Can the hon. Gentleman name one provision in the Companies Bill that fits that description?

Mr. Dobson: I am told by my hon. Friend the Member for Dagenham (Mr. Gould), who has spent rather more time on this subject than I have, that the Insolvency Bill suffered from the same shortcomings and, as we know, the Financial Services Bill needed massive corrections at this stage. If the Bill did not need correcting—if it had no shortcomings—why were 1,000 amendments tabled? Hundreds were produced in Committee——

Mr. Dennis Skinner: One of that series of amendments was designed to deal with the crookedness of the City and the casino economy. As my hon. Friend knows only too well, because his constituency is close to the City, crookedness in the City is growing rapidly. Every time the Government introduce such a Bill, they have to amend it substantially. This latest Bill is an attempt to keep the legislation in line with the present crookedness of Lloyd's and others. Hence the tabling of several, if not scores of, Government amendments. A number of things are happening at Lloyd's—money is being lost by so-called "names" and there are prospective losses. The Government are trying to tighten things up because some of the accountants whom the hon. Member for Beaconsfield (Mr. Smith) represents have not been doing their jobs properly. Ferranti is a good example.

Mr. Dobson: I quite agree. As ever, my hon. Friend puts it in a nutshell. These shoddily drafted Bills are brought before the House, and then hundreds of amendments are produced in Committee and on Report, here and in the House of Lords. As I have said, more than a thousand were tabled to the Companies Bill.
For some reason that I cannot understand, the Government purport to be surprised—and they certainly panic—when hon. Members insist on doing their job properly and on scrutinising the legislation. Some amendments are politically contentious, others are not. For instance, I assume that Conservative Members want to catch the fraudsters—we certainly do—so it would be as well if the technicalities of the Bill permitted them to be caught, prosecuted and gaoled on the basis of proper evidence, not of confessions.
Some amendments are not politically contentious but are produced in response to points made by the Opposition, and we welcome that. The Minister responsible for the Children Bill has responded to many points made by outside organisations and hon. Members in the Committee to try to improve the Bill. However, the fact that he has produced amendments does not guarantee that they will achieve what they are intended to achieve. All of them need to be examined carefully to ensure that they are soundly worded.
This applies with equal or even greater force to Bills such as the Children Bill, the aspirations behind which we all support. All hon. Members want the time and opportunity to do this part of the job that we were elected to do. The Government have failed to provide the time, partly because no conceivable amount of time can compensate for the sloppy drafting and the multitude of amendments made in Committee and in the House—in some cases only a matter of hours before they are to be debated.

Mr. David Martin: When will the hon. Gentleman come to the real reason for the guillotine, which has nothing to do with the merits of the Companies Bill or the Children Bill and everything to do with those who are supposed to be in charge of the Opposition losing control of their wild boys over the issue of coal? I sat up a great many hours last night waiting to get on with the Bill and saw the 10 o'clock business motion opposed by the Opposition when we wanted to get on with discussion of the real issues.

Mr. Dobson: Apparently, everything was caused by some wild coalmen, but I did not see any about last night.

Mr. Nicholas Bennett: The hon. Gentleman was not here.

Mr. Dobson: I was here most of yesterday evening. I popped out at about midnight, just about the time when the Leader of the House shuffled in and caused us to hold those debates——

Mr. Nicholas Bennett: The hon. Gentleman has just said that he was here most of the evening. Can he explain why he did not vote in any of the Divisions?

Mr. Dobson: The hon. Gentleman is witless, blind and stupid, because I did vote in some of the Divisions. He had better start by finding the right Hansard.

Mr. Frank Haynes: We had a serious debate yesterday on business contributions to the Conservative party. The Conservative Members all stood up blocking our new clause and wasting time, but our case was first class and we were doing our job as an Opposition—[Interruption.] I hope that the hon. Member for Beaconsfield (Mr. Smith) will listen to me, because I am responsible to the Chair, not to him.
The new clause would have done a first-class job on behalf of a community that is crying out for it. The Government have told the trade unions to hold ballots on raising money for a political levy to give to the Labour party, but when we suggested that companies should consult shareholders with a ballot on whether they wanted the business to contribute to Conservative party funds they turned down the idea. Conservative Members went into the Lobby and voted against it. They were filibustering nearly all night and they should be ashamed of themselves.

Mr. Dobson: In his usual mild-mannered and persuasive way, my hon. Friend has put his finger on the Government's double standards where contributions to the Labour party by trade unions are concerned. Trade unions must set up a separate fund and conduct ballots of all their members, and if they decide to set up such a fund

and ask their members to make contributions every one of them can opt out. Last night the Tories stuck by their position, as ever, that there should not be a ballot, a separate fund or opting out for companies.
As the point made by hon. Friend the Member for Ashfield (Mr. Haynes) shows, there are other double standards. We put forward a new clause; Conservative Members can speak against it at considerable length and then vote against it. Such debates are legitimate, as are such votes, but when we want to debate and vote on amendments that the Government table they do not want us to. Apparently we are breaking their rules. The rule of this arrogant Government is, "We tell everyone what to do, including the House." But as a distinguished former Cabinet colleague of the Leader of the House told me yesterday, the Government have forgotten one iron rule: in the part of the Session coming up to July, the Government have the Commons over a barrel; in the spill-over period, the Commons have the Government over a barrel. So the Government would be wise to run their business so as not to expose themselves as badly as they have done on this occasion by their incompetence.

The Minister for Health (Mr. David Mellor): rose——

Mr. Dobson: I shall not give way now—I am sure that we shall hear the hon. and learned Gentleman's point later.
These guillotines will make matters worse. They will prevent the House from doing justice to either of these important Bills. Forty-six seconds per new clause or amendment for the Children Bill cannot be right. Tonight we shall vote, not against the Children Bill, but against the guillotine that imposes those 46 seconds.

Mr. Roger Sims: I rise to support the motion, but with somewhat mixed feelings. One of those feelings is relief that my right hon. and learned Friend the Leader of the House has stepped in to save the Children Bill, progress on which was being followed anxiously by many organisations. There seemed to be a real danger that the Bill could he wrecked by a handful of hon. Members who may claim to represent the interests of the miners but are clearly not concerned with the interests of children in this country.
My other feeling is one of sadness. In 15 years in the House I cannot recall a Bill for which a timetable motion was less appropriate. The Bill is the product of years of inquiries. White Papers, campaigns and representations by people and organisations. It was given detailed scrutiny in both Houses in a non-partisan atmosphere. That we should have been expected to complete the final stages of such an important Bill in the small hours of the morning merely because the Opposition insisted on inserting into our business a debate on the economy was regrettable. That we are now obliged to complete the Bill as the second business on a Friday and subject to a timetable is to be deplored.
I know the frustrations of being in opposition. I sat on the Opposition Benches for five years. Happily, in our system we do not engage in fisticuffs or worse, and even the use of strong language is somewhat circumscribed. I can therefore well understand why some people feel that they want to demonstrate their annoyance and, sometimes, their sense of outrage at some of the things that the Government of the day are doing.
To use parliamentary procedural tactics to delay and upset Government business is perfectly legitimate. When we were in opposition we did that individually and collectively, but such tactics need to be employed with discretion. It is one thing for the Opposition to use all the available means to impede a measure which is clearly contrary to their political philosophy, but it is quite another to do so in respect of legislation which is not subject to party political differences and is supported in all parts of the country. There can he no better example of that than the Children Bill.
We should have been able to finish consideration of the Bill on Tuesday night. Some Opposition Members would no doubt argue that we could have done so. The evidence that I heard and saw suggested that we could well have spent a long and unproductive night and possibly part of the morning. We saw that pattern beginning to emerge last night. I do not suggest that Oppossition Front Bench Members or their colleagues with an interest in the Bill would have been party to any such tactics, but we all know that a small number of hon. Members can frustrate progress.
We also know that agreements and understandings, however well meant, do not always work. The shadow Leader of the House, the hon. Member for Holborn and St. Pancras (Mr. Dobson), made the plea that nobody had approached him to come to some understanding about how the Bill should be handled. However, I am afraid that we have learned that such understandings are worthless. We have seen that the Opposition simply cannot control their Members. In the circumstances, the Government's business managers had no alternative but to introduce a timetable motion. Its term allow three hours, which should be adequate to consider the amendments. Despite all the statistics expounded by the hon. Member for Holborn and St. Pancras, the hon. Gentleman knows perfectly well that many of the amendments are purely technical and that many of them meet points made in Committee.

Mr. Dobson: I agree with the hon. Gentleman that many of the amendments are technical. Does he agree that there is considerable evidence that many of them are technically faulty and incorrect and need to be improved if the Bill is to work properly? I am rather fortified in my view about that by a former Tory Cabinet Minister who is now a Member of the House of Lords. He sought me out and told me how much he agreed with what I had said during a debate on a previous guillotine motion when I talked about this very aspect.

Mr. Sims: I have seen few amendments to amendments tabled by the Opposition. If they have spotted faults they should have drawn attention to them in that manner.
The three hours proposed in the motion will give us more time to discuss the Bill than the time allowed in the original understanding between the two sides. I have no great complaint about the three hours, but it is unfortunate—to put it no higher—that we shall have to discuss these matters tomorrow under some pressure of time. That is a sad end to the proceedings on the Children Bill which up to now had shown Parliament at its best. It is a turn of events which discredits the Labour party—a matter which does not distress me particularly—but it also discredits the House, which distresses me considerably.

Mr. Stuart Bell: It is a pleasure to follow the hon. Member for Chislehurst (Mr. Sims) because I know how hard he has worked on the Children Bill for many years. He was right when he said that its history goes back several years through a variety of law commissions and reviews of the law. It also had the impetus of the Cleveland child abuse crisis. I do not agree with the views that he expressed in the latter part of his speech because they contradict some of his earlier statements when he said that the guillotine had been used by previous Governments.
The tactics that we have seen this week were used in the past by the Conservatives. When the deputy Leader of the House referred to the Churchill-Eden era, he reminded me of my first visit to the House of Commons. I was in the Strangers' Gallery and listened to Sydney Silverman advancing an argument during a debate on a guillotine motion not dissimilar to that advanced by the hon. Member for Chislehurst. He said that there are times when the guillotine is appropriate and times when it is not.
Without wishing to incur the wrath of Conservative Members I can say that I think that the guillotine was appropriate in 1976 when we had to push the shipbuilding and dockyard nationalisation schemes through. We had to do that because of the tactics used by the Conservative Opposition at that time. They did everything that they could legitimately and within parliamentary means to prevent a Labour Government with a mandate putting on the statute book two vital elements of their legislative programme. The guillotine was used at that time by the then Leader of the House, my right hon. Friend the Member for Blaenau Gwent (Mr. Foot). In 1968 he and Enoch Powell frustrated the will of a Labour Government about the reform of the House of Lords and they used parliamentary tactics to do that.
We all know that the guillotine goes back to the time when Irish Members frustrated the business of the House to such an extent that it had to be used to make progress. The Children Bill was at the heart of the speech by the hon. Member for Chislehurst. That Bill reflects what the Lord Chancellor said, that the upbringing of children is the fundamental responsibility of parents. The object of the Bill is to establish rights for children and parents and to look at the erosion of parental rights. It looks at the means by which we can protect children such as Doreen Mason, about whom the hon. Member for Chislehurst spoke, and Kimberley Carlile, about whom I have spoken in the past.
We all know that children are at risk in society, and that we must protect them while not intruding in family life as we understand it. That is the balance that we sought to strike in Committee. The Bill was non-political and the Minister of State and the Solicitor-General took us through it on a non-political basis. My hon. Friend the Member for Monklands, West (Mr. Clarke) took us through it carefully. We had long discussions and amendments proposed by Back Benchers were considered by the Government and by civil servants. After careful consideration we came up with a Bill which we hope, with foresight rather than hindsight, will protect children and will do so without unnecessary intrusions. In Committee we saw the abolition of the place of safety order which was used extensively in Cleveland and we created an emergency


protection order and child assessment orders for the protection of children. We had legitimate debate on all those matters.
The shenanigans on Tuesday evening which prevented us from moving forward were in a sense a parliamentary occasion. I have often looked upon my hon. Friends the Members for Bolsover (Mr. Skinner) and for Bradford, South (Mr. Cryer) as being rather like Blucher at the battle of Waterloo. They plough in from the side, change the nature of our business, make their point and then go across and shake the hand of the Duke of Wellington and a great victory has been won. We are all more aware today of the Associated Ports (No. 2) Bill than we were two days ago.
I gave a commitment to the National Union of Mineworkers in Durham that I would support them in their efforts to prevent a coal terminal coming to Middlesbrough. I did that as part of the strategy to have proper planning for all our energy requirements and to keep the Durham coal field, with its 10,000 miners, going. Therefore, I was not particularly enamoured of any technique on the Floor of the House to try to prevent the Children Bill going through.
As my hon. Friend the Member for Leicester, East (Mr. Vaz) said, at 1.30 in the morning we were prepared to stay here throughout the night. In the six years that I have been in Parliament, there have been many occasions when the Opposition have taken the Government through the night, through to 1.30 the following day, and the Government have lost the business of the House for that day. We had assurances from those who were wishing to make a point on the Associated British Ports (No. 2) Bill that they would not prevent the Children Bill from reaching its remaining stages by the close of business.
The Government had their quorum in place. As my hon. Friend the Member for Bradford, East (Mr. Madden) said, there were aye votes of 101 and 102 at 1.30 in the morning. The Opposition were prepared to go through the night, and if we had done so the Children Bill would have gone through its remaining stages in this House. My hon. Friend the Member for Leicester, East made that proposition to the Minister, but other decisions had been made, and the Government moved the adjournment of the House. Until tonight, when the Leader of the House referred to discussions with the usual channels, I had thought that there had been discussions through the usual channels and that we could reach a reasonable agreement on the remaining stages of the Bill that would have allowed us the proper amount of time to discuss it.

Mr. Mellor: As the hon. Gentleman knows, I hold him in great respect generally, and particularly on the issue of children. He has had the grace to acknowledge that a group of Members with no great interest in the Children Bill took action because they wanted to make a point. Does the hon. Gentleman really think that it would be in the right spirit of the debate on the Bill that had otherwise proceeded so sensibly that we should have to run the gauntlet of people ready to have a Division on matters of no substance in order to make a point? In those circumstances, is it not better to get back to a framework of discipline, within which we can take a common-sense approach to the Bill?

Mr. Bell: I understand the point that the Minister is making, because there is no doubt that we would have had a disruptive evening, with votes on a variety of amendments. However, our view is that it was up to the House of Commons to force a passage through such obstacles and to discuss the amendments as best we could. All the Opposition Members who had served on the Committee were in their place. For example, my hon. Friend the Member for Ogmore (Mr. Powell), who had tabled new clause 10 dealing with the rights of grandparents, was there, as were those who supported him. I agree with the Minister that we would have had to run the gauntlet, but we were prepared to be here and to have that discussion over and above what was happening on the sidelines, with Blucher coming in from the wings.
As the hon. Member for Chislehurst and my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) have said, we are now left with 46 seconds for each amendment. Many of them are technical amendments, but we have lost control over the remaining stages of the Children Bill, and we shall not be able to cover those final amendments in the way that we would have done if we had had a proper Report stage. If we had a proper debate, we could pick up, even at this late stage, the rucks in the texture, as Lord Denning once described parliamentary evasion or lack of clarity. In the final stages of the Bill, we have lost the opportunity to exercise foresight, rather than hindsight.
The guillotine represents the power of the Executive over the Legislature and the Opposition must submit to that power because we do not have a majority. However that power should be used sparingly and wisely. It ought not to be used simply because the quorum of Conservative Members who had to be in the Palace of Westminster for the duration of the business wanted to get home early. The time of 1.30 in the morning may seem late to members of the public, but hon. Members on both sides of the House know that it is not late in parliamentary terms. The power to guillotine was used unwisely on this occasion. I can only hope that, in the final stages of the Bill, the other place will look carefully at the amendments that we have not been able to go through properly so that when the Bill reaches the statute book and is used to protect children and parents in the best possible way it will be as good as if it had left the House of Commons without being guillotined.

Mr. David Hinchliffe: I am particularly angry at the guillotine motion because, along with others who are here tonight, I served on the Standing Committee on the Children Bill and both sides of the Committee played a constructive part in bringing forward progressive helpful and long-overdue legislation. I am angry about the way in which the Government have tried to deflect responsibility for the shambles that has occurred in their business management. They have had plenty of opportunities to allow time for the Bill to be properly considered at a sensible time of day rather than in the middle of the night. Now we have just 46 seconds for each amendment.
I am worried about that because a number of important amendments have still to be discussed. I accept that many of the amendments are technical, so there will possibly be no debate on them and they will be nodded through. However, a number deal with detailed concerns. For


example, new clause 10 deals with grandparents. Like many other hon. Members, I have constituents who are grandparents and who feel deeply aggrieved at the way in which the law affects them and their relationship with their grandchildren. The granddaughter of a woman who lives near to me has recently been adopted, and the grandmother no longer has contact with the child whom she raised for the first six years of the child's life. I feel strongly about that and I know that both the child and the grandmother also do. This is a deeply emotional issue for many people. Many other hon. Members have similar cases, and some that are even more heart rending.
I am concerned about the rights of children in care, which are affected by a number of amendments that remain to be discussed. I have experience in social work and I have seen how children get into care and how our treatment of those children negates basic human rights. I am particularly concerned about care-leavers because, as a result of the way in which the Government have changed the rules in social security, vast numbers of young people are left vulnerable to exploitation when they leave care. I hope to raise this issue when we debate tomorrow two of the amendments that I have tabled. However, I suspect that they will be dealt with only briefly. Only yesterday I was talking to a probation officer who told me of the way in which the Government's changes in social security legislation, which have changed single payments to a loan, have resulted in one client, a young girl who had left care, going out as a prostitute to get some furniture for her flat. That is happening directly as a result of the Government's policy.
I respect the hon. Member for Chislehurst (Mr. Sims), who made an important contribution to the Bill. However, he seems to see the legislation in narrow terms. He sees it as being the answer to problems, but wider issues, many related to the Government's policies, should be addressed.
I know that there is concern about the exclusion orders, or ouster orders. I have experience of social security work, and I mentioned this case in Committee at some length. I had to remove a girl whose sister had made allegations about sexual interference by the mother's boyfriend. It was an awful experience. I had to take police officers to surround the house, get hold of the 12-year-old girl who had just come out of hospital after having her appendix removed, and take her into care. The law is wrong in such cases. The person who should be removed is the perpetrator of the abuse, not the child who was the victim. We have to do someting about that, and we cannot do it on the nod. It is criminal to allow only 46 seconds to discuss such serious issues and I am appalled at what democracy has come down to.

Mr. Vaz: My hon. Friend will recall that, a week ago, in discussions with the Minister of State, hon. Members on both sides of the House said that they were concerned that we would not get the full two days that we were promised to discuss the provisions of the Bill. Clearly, we shall not get those days. I can see only one Tory Back Bench Member who served on the Standing Committee here this afternoon, although others have issued press statements about this matter. If they were honest, they would tell the House that they had originally asked for more time to discuss this measure.

Mr. Hinchliffe: I entirely agree with my hon. Friend. I well recall the meeting that we had in the Cathedral room

at the Department of Health the week before last when the hon. Member for Batley and Spen (Mrs. Peacock) criticised the way in which the Government were arranging the business and causing the Children Bill to be considered in the early hours of the morning. The hon. Lady opposed that because she considered it to be unsatisfactory.

Mr. Sims: I am sure that the hon. Gentleman will agree that, it having been arranged originally that we should have two full days to debate the Bill, his right hon. and hon. Friends then insisted that there should be a full day's debate on the economy. That was why the Government had to make the arrangement that they did.

Mr. Hinchliffe: I shall deal with that argument in a few minutes. There is a clear connection between what happens to the economy of our society and what happens to children in that society. I am sorry that the hon. Member for Chislehurst fails to recognise that connection.
It has been alleged that time has been wasted during oar consideration of the Bill. When the Minister replies, I challenge him to produce one example of time wasting in Committee. I attended virtually every sitting when the Bill was being considered in Committee and I do not recall an irrelevant speech being made from either side of the Committee. The debate which took place on the Floor of the House the other night on day care, for example, was extremely interesting. Some valuable comments were made by hon. Members who had not hitherto been involved in the Bill. I read the report of the debate in Hansard and I could not find one area of it that was not directly relevant to the issues that were before us.

Mr. Mellor: Although the hon. Gentleman and I have disagreed about certain parts of the Bill, and although we can always argue about how long it should take to formulate a point, I am not criticising him or any of his hon. Friends who served in Committee for advancing their arguments. Our consideration of the Bill in Committee remains for me one of the more pleasurable experiences of my time in this place. If the hon. Gentleman is being fair, and I know that he wants to be, he must explain why it was that at the beginning of the second day of our consideration of the Bill on Report an entirely uncontroversial amendment was made the subject of a Division. The Division was called by two hon. Members who had played no previous part in our consideration of the Bill. It was clear, as the hon. Member for Middlesbrough (Mr. Bell) has conceded today, and as the hon. Member for Monklands, West (Mr. Clarke) conceded on Tuesday night, that that was part of a tactic that would have continued and would have had the effect of souring the atmosphere. The hon. Member for Wakefield (Mr. Hinchliffe) cannot delude us about that. However sincere he and his hon. Friends who were members of the Committee which considered the Bill may be, others were determined to make a monkey of the business of the House, and that is a fact.

Mr. Hinchliffe: I am happy to tackle head-on the issue of the private Bill to which the Minister has referred obliquely. There is a direct connection between the implications of that Bill and the welfare of children. I shall come to that. The Minister is seeking to dodge the reality that the Government have their priorities wrong. Bearing in mind the time that they have had and the issues that we have debated—many of them have been far less serious


than those raised by the Children Bill—there has been sufficient time for the Bill to be considered fully at a normal time of day. It is the Government, not the Opposition, who have their priorities wrong.
The hon. Member for Chislehurst referred to the debate on the economy which took place yesterday. It is not the Opposition's fault that there is a slight problem with the balance of trade. It is not our fault that there is a trade deficit, that inflation is increasing and that interest rates are going through the roof. Equally, it is not our fault that people are having to go on council house waiting lists because they cannot meet mortgage repayments. All these factors have a direct bearing on children. There are families in my constituency who will become homeless because their houses are being repossessed because they cannot afford the huge repayments which are the result of increased interest rates. If Conservative Members—[Interruption.]It seems that some hon. Members wish me to name names. If they wish to see some of the details, I shall be happy to supply them. I shall certainly do so if the people concerned are prepared to have their names put forward. I shall be quite happy to take Conservative Members to see these people. I do not make up these stories. Some of us have surgeries every week—in some instances, several times a week—and we meet the people. We are aware of the day-to-day realities in our constituencies as a result of the Government's actions. There is a direct connection between the economy and the welfare of children, and it angers my hon. Friends and me that that is not recognised by the Government.

Mr. Mellor: I took the hon. Gentleman's word that he wanted seriously to explore the matters which lie behind the Children Bill. I put the argument to him again. How can he explain the decision taken at the beginning of the second day of consideration of the Bill on Report by two of his hon. Friends, who had hitherto taken no part in the consideration of the Bill, to call a Division on a purely technical amendment? Does he not know as well as I do that it was common currency and discussion around the House that his two hon. Friends intended to call Divisions throughout the night if we had gone on with our consideration of the Bill? That was the truth of the matter.

Mr. Hinchliffe: To be fair, following the Minister's previous intervention I said that I would deal with that matter. It is something about which I feel strongly. I happen to understand and sympathise with the actions of my hon. Friends the Members for Doncaster, North (Mr. Welsh) and for Bolsover (Mr. Skinner). I suspect that my hon. Friend the Member for Doncaster, North, who called the Division to which the Minister has referred, was not fully aware of the issues raised by the clause. When he was made aware of them, he did not vote against the clause, and nor did anyone else. No one wished to see that clause defeated. My hon. Friends and I continued to support it. There would have been Divisions only on issues that were contested, and there were a number of those. There are serious issues which separate the two sides of the House.

Ms. Hilary Armstrong: Perhaps my hon. Friend will care to put to the Minister that the debate which we were due to have on the evening of Tuesday following the Division to which he has referred was on new clause 10, which concerned grandparents.

There would have been no rogue vote on that new clause. Hon. Members had come to the Chamber ready to debate the new clause. We were no later reaching it than we expected earlier. It was clear, however, that the Government would not be able to keep their troops in the House. The Government were concerned and they brought the consideration of the Bill to an end. There would have been no rogue votes. The debate on grandparents would have taken place whatever the circumstances and whatever the attitude of my hon. Friends to any other measure.

Mr. Hinchliffe: My hon. Friend is correct. My hon. Friend the Member for Doncaster, North, who called what has been described as the rogue vote, is a grandfather. I know that he feels deeply about the issues that we were to debate and the surrounding issues. I have no doubt that he would have contributed to the debate, as he did to the debate on day care.
The central issue is that the Children Bill deals with the needs of the most disadvantaged in our society. Unfortunately, the Government are attaching less priority to it than to numerous other measures that are designed further to advantage the advantaged. Privatisation measures are designed to allow those who have plenty to have even more. That is the kernel of the debate. Under this Government Bills which deal with human need, such as the Children Bill, take second place to Bills which deal with human greed.
I shall give an example. We learnt today that next Wednesday we are to be faced with a squalid little measure, the Associated British Ports (No. 2) Bill. Can anyone explain why that private Bill is being given prime time?

Mr. Deputy Speaker(Mr. Harold Walker): Order. The hon. Gentleman cannot go into those matters now. Those issues are not referred to in the motion before the House. The hon. Gentleman must confine his remarks to that motion.

Mr. Hinchliffe: With great respect, Mr. Deputy Speaker, I accept your ruling. As one who has been a Member of this place for only two years, I find it strange that we have to sit up for half the night, as we did on Tuesday, to discuss disadvantaged children, the care of children and child abuse because, we are told, there is no other Government time when time can he made available for a squalid private Bill which involves the interests of certain hon. Members. Hon. Members have been on freebies to South Africa——

Mr. Deputy Speaker: Order. I remind the hon. Gentleman of what I said a few minutes ago, that he must confine his remarks to the motion before us. The matters to which he referred are set down for debate next week, and I think that we had better wait for next week to discuss them.

Mr. Skinner: On a point of order, Mr. Deputy Speaker. I know that the House is discussing the effects of our proceedings last night and the fact that the Government are now in a complete shambles, but I want the Government spokesman to tell us when the Government will make a statement about the resignation of the Chancellor of the Exchequer, which has just been announced on the tapes. Why is it that in the middle of a debate, which has been brought about because of the


shambles within the Government, there is no spokesperson available to tell us about the dramatic resignation of the Chancellor? Why is not the Prime Minister in the Chamber to tell the House why that has happened? Has the Chancellor been driven out by Sir Alan Walters? Who will succeed the Chancellor? Those are very important questions
I know that the debate is important and that my hon. Friend the Member for Wakefield (Mr. Hinchliffe) is doing a fair splash job on the question of the guillotine, but the resignation of the Chancellor is a most important matter. Obviously there has been a dramatic confrontation between the Prime Minister and the Chancellor during the past few hours, which has reached its untimely conclusion with the resignation of the Chancellor. Why is there no one on the Government Front Bench ready to explain what has happened? They have a duty to explain to this House why the Chancellor has resigned.

Mr. Deputy Speaker: The House knows that I have no responsibility for the resignation of the Chancellor.

Mr. Cryer: Further to that point of order, Mr. Deputy Speaker. Surely you have a responsibility if a request is made by the Government to make a statement about the Chancellor's resignation. You would have to consider whether and how to fit in an emergency statement with the business of the day. The question would then arise whether any statement would come out of guillotine motion time because we have recently resolved to have a three-hour debate. Not only would there need to be consideration of whether a statement on this important economic matter should be allowed, but on what effect it would have on this three-hour debate. I seek your guidance, Mr. Deputy Speaker. It is a time of great economic crisis and I wish to know whether the Prime Minister has sought leave to come to the House to make a statement on what appears to be the biggest crisis of this Parliament.

Mr. Dobson: Further to that point of order, Mr. Deputy Speaker. The Leader of the House was swift to come to the Chamber at midnight to make a statement. He is here now, and I wonder whether he has approached you and confirmed what is now being reported on the tapes and on BBC television news—that the Chancellor has resigned in the middle of one of the most profound economic crises that this country has faced. It is right and proper that a Government Minister, and preferably the Prime Minister—who is First Lord of the Treasury—should come to the House and explain what is happening.

Mr. Alan Williams: Further to that point of order, Mr. Deputy Speaker. It is clear that we are trapped in the procedures of the House. The debate is due to continue for a set time, yet decisions will be taken at the end of that time that will pre-determine what happens tomorrow. I do not wish further to venture into the seriousness of the present situation, but it is clear that the House will wish to have an opportunity to question and to discuss the matter. Either there must be a statement this evening or there must be one early tomorrow.
In order to ensure that this debate can proceed in a sensible manner, would it not make sense to have a brief Adjournment of the House while the usual channels discuss the way in which we can deal both with the business before us and with the problems that we all wish to address?

Mr. Bell: Further to that point of order, Mr. Deputy Speaker. Although I understand your position, the Opposition sat through Prime Minister's questions this afternoon when the right hon. Lady gave her backing to the Chancellor. The question is whether, when the right hon. Lady made that statement, she knew of the pending resignation and whether she was deceiving the House. We have a right to know whether she made that statement in the full knowledge of the facts or whether she was unaware of the facts.
It is for the Government of the day to control the business of the House and to make the necessary statement at this time. We sympathise with our hon. Friends who are trying to discuss the guillotine motion, but in the national interest it is right that the Prime Minister should make a statement now, especially in the light of the probable impact on interest rates. The Prime Minister said today that the Chancellor had her full support and that the civil servant at No. 10 did not have that same support. It is therefore right and proper not only that there should be a statement, but that that statement should be made by the Prime Minister.

Mr. Andrew F. Bennett: Further to that point of order, Mr. Deputy Speaker. May I press on you the suggestion made by my right hon. Friend the Member for Swansea, West (Mr. Williams) that there should be a short adjournment of the House so that the matter can be dealt with sensibly and reasonably? It is extremely unsatisfactory for the House not to be told the full facts. A proper statement must be made at the earliest opportunity. There would be little point in continuing to raise points of order and to force the Government to make a statement. It would be simple for the Leader of the House to stand up and ask for an adjournment, which would enable the Prime Minister to come to the House and make a clear statement about what has happened. It is the right hon. Lady's duty to report to the House before making statements outside.

Mr. Tony Banks: Further to that point of order, Mr. Deputy Speaker. Good news does, indeed, move quickly. As the Leader of the House and the Chief Whip are both here, it is right to ask them for a statement. The implications of the Chancellor—even this Chancellor—resigning will be profound upon the stock market and on international confidence in the pound. I assure you, Mr. Deputy Speaker, that many of my constituents will be worried about their gold stocks, their shares and all the other assets that they have managed to accumulate during the past 10 years. In those circumstances—[Interruption.] I note, Sir, that I have your close and undivided attention.
I suggest that there is a statement because I, for one, am becoming rather concerned about the fate of the Chancellor. He is not the most lovable person, but if he jumped from No. 11 Downing street there would now be a very large hole in the road, which could be catastrophic for the Prime Minister as she rushes back in her bullet-proof chauffeured limousine. It is because we feel such great concern for the Chancellor that we must know exactly what has happened to the poor fellow. He must be having a very rough time.

Dr. John Reid: Further to that point of order, Mr. Deputy Speaker. Is it not opportune to remind the Leader of the House that less than three hours


ago the Leader of the Opposition asked a specific question about the Chancellor and about part-time advisers—[Interruption] We are completely in the dark. The Prime Minister gave no sign of what was to happen. It is a crucial time, yet we have absolutely no idea of who is now to marshal the economic resources of this country. However, a few moments ago I did notice that my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) had been called from the Chamber, so perhaps interesting developments are taking place. Because this matter was discussed no more than three hours ago and because of the grave implications for the stock market and the economy, we are in order to demand a statement to the House.

Several Hon. Members: rose——

Mr. Deputy Speaker: Order. I remind the House that the matters being raised are not the responsibility of the Chair. Equally, I well understand the seriousness of the situation. I very much hope that hon. Members will bear that in mind in their points of order.

Mr. Cryer: On a point of order, Mr. Deputy Speaker. I am grateful to you for calling me as I have a genuine point of order—as, indeed, has every Opposition Member. There has been a suggestion that the House should adjourn while we consider the economic crisis that is engulfing the country because of the incompetence of the Government's conduct of affairs, the resignation of the Chancellor and the issues arising from the guillotine motion that is currently before the House.
My right hon.Friend the Member for Swansea, West (Mr. Williams) requested an adjournment of the House, and I wonder whether that would be treated as a dilatory motion or whether it would be accepted. If it were to be treated as a dilatory motion under the terms of the guillotine, it could be moved only by a Government spokesman. It is incumbent upon the Government to rearrange the proceedings of the House and to make a statement. It is outrageous that such events can happen and that the arguing and bickering between No. 10 and No. 11 about Professor Walters can result in the resignation of the Chancellor, with the information being given to television and radio but not to this House. We are the accountable body.

Mr. Deputy Speaker: The hon. Gentleman began by saying that he had a genuine point of order, but he is now raising matters that have nothing remotely to do with me. Only a Minister can move a dilatory motion and even that would not make provision for added injury time.

Mr. Skinner: rose——

Mr. Deputy Speaker: Order. The hon. Gentleman knows that he must keep his seat while I am standing.
That would not of itself add to the time allowed for the guillotine motion.

Mr. Dobson: On a point of order, Mr. Deputy Speaker. With the exception of the wind-up speeches and the interrupted speech of my hon. Friend the Member for Wakefield (Mr. Hinchliffe), there are not many Members any longer wishing to take part in the debate on the guillotine motion.
I seek your advice, Mr. Deputy Speaker. If we are to ensure that the opportunity arises within the rules of order for a statement to be made, would it not be necessary for us to pass the guillotine motion? As I understand it, that would then foreclose the proceedings for the rest of the day. I hope that either by your ruling, or by discussions through the usual channels, we can ensure that the most senior member of the Government has the opportunity to come to the Chamber to explain what has happened and why, in the middle of an economic crisis, the Chancellor of the Exchequer has resigned. That is a most important matter to the British people and to people abroad. It will affect markets and it must be cleared up. It will not be satisfactory to hon. Members on either side of the House for the situation to be explained and clarified by Mr. Bernard Ingham. The place for it to be clarified and reported to the British people is in the elected House of Commons. That is our job.

Sir Geoffrey Howe: Further to the points of order in which Opposition Members have expressed some interest, Mr. Deputy Speaker. I would suggest two things. First, the resignation, or proffered resignation, of a member of the Government does not normally lead to the making of a statement, and so it does not follow that that should happen as a matter of course. Secondly, it would certainly not follow that there should be any deflection of the business before the House for a variety of reasons, including those referred to by the shadow Leader of the House. I suggest that the business of the House, the debate now taking place and that which is to follow, should proceed. I shall see whether I can consider through the usual channels the possibilities that have been suggested, but I do not want to imply that the business would be interrupted or any presumption of a statement on the matter. However, I can show my willingness to listen.

Several Hon. Members: rose——

Mr. Deputy Speaker: Order. It might be helpful if the House were to reflect on what the Leader of the House has said. The Chair has not yet received any intimation from the Government of a wish that a statement be made, but if there were such an intimation the Chair would have to consider it seriously. I am advised that whatever happens, at 7.46 pm, when the three hours provided for the guillotine motion expire, the Question must be put, notwithstanding the seriousness of other matters that have intervened. I am sure that the House will wish to consider whether it would like to have a view from the Front Bench spokesmen before the House is required to make its decision on the guillotine motion. In the meantime, the Chair will listen to any further genuine points of order and, while those are being dealt with, those responsible may wish to consider the appropriate response in the circumstances.

Mr. Dobson: Further to that point of order, Mr. Deputy Speaker. I recognise all the problems that the Leader of the House faces and the dilemma that you face. May we have a clear ruling on whether, if the guillotine motion were to be passed, the Government could interrupt the then guillotined business in order to make a statement? We should not proceed with the discussion on the guillotine motion until we know that.

Mr. Deputy Speaker: Let me respond to that immediately. I have made it clear to the House that the


time available for the guillotine motion will expire at 7·46 pm and at that time, if not before, the Chair will be required to put the Question. If the hon. Gentleman is asking what might be the situation if there were a request for a statement to be made at a time after that, doubtless, as in the past, arrangements can be made for a subsequent statement to be made.

Mr. Dave Nellist: On a point of order, Mr. Deputy Speaker. Can you confirm that under normal circumstances any hon. Member wishing to make an application under Standing Order No. 20 would have had to have submitted an application to Mr. Speaker before 12 o'clock today unless circumstances arose after that time which, in the view of the Chair, were sufficiently urgent to allow a later application? Must not the Chancellor's resignation, and hence the collapse of the Government's direction of economic policy, be the one occasion in this Session when an application under Standing Order No. 20 from me or from one of my hon. Friends should be accepted by the Chair and the business of the day set aside for a debate, if for no other reason than to find out whether the deputy Prime Minister is going to get his house back?

Mr. Deputy Speaker: Our Standing Orders rule out any application under Standing Order No. 20 being made in the course of this day's sitting. Equally, an application for an emergency debate under Standing Order No. 20 cannot be made on a Friday. If there were a request for a statement to be made and the Chair conceded that a statement should be made after the conclusion of the motion that is before the House and before the first guillotine falls, it would take time out of that provided in the motion before the House.

Mr. Ron Leighton: On a point of order, Mr. Deputy Speaker. Can you give us some guidance? We are not sure who is running the country or who is speaking for the Government. Yesterday, we were assured by Ministers, and it was confirmed by the Prime Minister today, that advisers advise but Ministers decide. Now the Minister has resigned, so what credence can we give to the guarantees that have been given to us? The House of Commons needs to know who is running the Government. Is it the advisers or is it the Ministers? Are other Ministers going to resign? I want a clear statement in the House of Commons on the present position.

Mr. Tony Baldry: On a point of order, Mr. Deputy Speaker. It will not go unnoticed in the country that the vast majority of these points of order are an abuse and that the Labour party's response was to start singing the "Red Flag" in Committee Room 10 and to turn this Chamber into something like a knockabout Whitehall farce.

Mr. Skinner: On a point of order, Mr. Deputy Speaker. Further complications have arisen during the past two or three minutes which make the passage of the guillotine motion on the Companies and Children Bills more problematical.
The Foreign Secretary has now been given the Chancellor's job. That being so, it could well be that the Leader of the House is going back to the Foreign Secretary's job. If that is the case, we have not got a Leader of the House to carry the guillotine through.
I believe that the House needs to adjourn, because while this pack of dominoes is falling we are not sure which Minister is in what charge of which Department. I think it imperative at this point, as the Leader of the House has now left the Chamber—presumably to get the Foreign Secretary's job, his own job, back—for us to adjourn for the matter to be resolved.

Mr. Deputy Speaker: Let me remind the House that these are very grave matters, which should be dealt with very seriously by the House.

Mr. Dobson: On a point of order, Mr. Deputy Speaker. These are indeed very serious matters, and I think that that is all the more reason why it is right and proper for a senior Minister—whoever he may be at the moment—to come to the House and explain what is going on, who is being reshuffled and who has resigned. If the matter is to be dealt with properly, I think that the sitting should be briefly suspended to give the Government the opportunity to sort out who is going to make the statement, and then deal with this in a proper and seemly manner; otherwise, there is no possibility of the current debate continuing in any sensible way.
I hope that you will accept my request for a brief suspension of the sitting, Mr. Deputy Speaker. I think that there would be no objection on either side of the House.

The Parliamentary Secretary to the Treasury (Mr. David Waddington): Unaccustomed as I am to public speaking, Mr. Deputy Speaker, in an effort to help the House, may I tell the hon. Member for Holborn and St. Pancras (Mr. Dobson) that serious consideration is now being given to the making of a statement at the end of the debate on the guillotine motion?

Mr. Alan Williams: We are obviously very grateful to the——

Mr. Deputy Speaker: Order. I did not call the right hon.Gentleman. I wonder whether——

Mr. Williams: On a point of order, Mr. Deputy Speaker. We are very grateful for the intervention: it was helpful. The question remains, however, not only of the statement but of who makes the statement. [Interruption.]

Mr. Deputy Speaker: Order. We could continue with such points of order interminably, and that would not help us. I should have thought that the House might have found the statement that has just been made very helpfully constructed.

Several Hon. Members: rose——

Mr. Deputy Speaker: Order. If, as now seems very likely, we will not be able to return immediately to the guillotine motion, and are going to lose time, it might make sense for the House to have a brief cooling-off period. I suspend the sitting for 10 minutes.

Sitting suspended.

On resuming——

Mr. Speaker: Procedurally there is no way in which we can change the motion before the House. The Question will have to be put at 7.46 pm. If the Government decide that a statement should be made, it could be made at that time. We should now proceed with the debate.

Mr. Dobson: On a point of order, Mr. Speaker. Further to your ruling, the Opposition agree entirely that the best way of dealing with this serious matter, following the brief suspension of the sitting, is that the Government should make a statement following the Division at the end of the debate. Therefore, we think that the debate should proceed.

Mr. Hinchliffe: I am grateful for the support that I have had from hon. Members during—[Interruption]

Mr. Speaker: Order. Will hon. Members kindly leave the Chamber quietly?

Mr. Hinchliffe: I was making the point—it now seems quite pertinent—that there is clearly a direct connection between the economic circumstances affecting many families, which are the direct consequences of the Government's policies, and the need to pursue some of the legal provisions that are contained within the Children Bill.
I wish to express my concern at the narrow view held by many Conservative Members concerning the way in which the legislation affects children. Clearly, we need to look at the reasons why young people are abused or have to be removed from home. It is clearly connected with the Government's policies on poverty, homelessness, the economy and unemployment. That is where my view differs from that of hon. Members who have criticised some of my hon. Friends from the miners group who, quite rightly, have been fighting valiantly the various ports Bills.
The issue concerning hon. Members—including myself—and others representing coalfield areas is how unemployment affects children, families and communities. In my area, communities have been wiped out as a direct result of the Government's policies on the coal industry. When the Government took office in 1979, within the Wakefield district 17,000 people were employed in 20 pits. That figure has now been reduced to some 3,000 employed at five pits. Fourteen thousand jobs have been wiped out, and that has a direct bearing on the prosperity of families, children and the lives that people lead. Therefore, I hope that hon. Members can see why some of my hon. Friends are concerned about the way in which children will be affected by the Bill coming before the House next week.
My constituency has been affected directly by pit closures. In addition, there has been a knock-on effect in the mining-engineering industry where 1,000 jobs have gone since 1979 in companies within my constituency supplying materials to the coal mining industry. It is important that we make the point that the ports Bills have a direct bearing on the worsening of the problems. I am deeply concerned about the impact those Bills will have on many coalfield communities in my area, the wider parts of Yorkshire and the midlands. The coalfield communities campaign said that if imports went ahead at projected levels 36 more pits would close.

Mr. Vaz: On a point of order, Mr. Speaker. My hon. Friend the Member for Wakefield (Mr. Hinchliffe) and I have served for many hours on the Standing Committee of the Children Bill. The Prime Minister's Parliamentary Private Secretary was conducting a conversation in the corner of the Chamber but he has now gone. Surely it would be fair and proper for the House to listen to what my hon. Friend has to say.

Mr. Skinner: rose——

Mr. Speaker: Order. There has been a good deal of Back-Bench discussion on both sides of the House. That is understandable, but I think that we should hear what the hon. Gentleman has to say.

Mr. Skinner: Further to that point of order, Mr. Speaker. I want to make sure that my hon. Friend, who was rudely interrupted by a number of people, including myself, when we heard that the Chancellor of the Exchequer had resigned, should be listened to decently. When the Parliamentary Private Secretary to the Prime Minister comes in here, we know what his game is. He is doing two things. He is saying to the Government Back Benchers, "This is the line. The Chancellor of the Exchequer is saying that he wanted Alan Walters sacked. That is not true"—

Mr. Speaker: Order. But he has not said it in the House or to me, so it is not a proceeding of Parliament. It is not a matter for the Chair.

Mr. Skinner: The second point, which is very important, concerns what happens in future. If the Parliamentary Private Secretary to the Prime Minister says to Conservative Back Benchers. "Say what I say and what the Prime Minister says", they do so, hoping to get a job in the reshuffle. There will be a number of jobs available in that reshuffle, so instead of listening to my hon. Friend they have been sorting out jobs for themselves in the Tory reshuffle.

Mr. Hinchliffe: I fully appreciate the points that have been made. I am concerned that there is a clear connection between the impact that the ports Bills will have on the coalfield communities in Yorkshire, north Derbyshire, the midlands and across the country, and the lives of families and children. I see a clear connection between what is contained in the Children Bill about the welfare of children and the action that has been taken by some of my hon. Friends to draw attention to the way in which the ports Bills will have a direct effect on people's lives in their constituencies.
If the ports Bill that we are to discuss next week in time that should have been accorded to the Children Bill and other Bills about the welfare of individuals goes ahead, 36 more pits will close and 51,000 jobs will go. Those jobs directly affect the lives of children for whom we are legislating in the Children Bill.
We differ in our views on child welfare in that Opposition Members believe that child abuse is not just about nasty people. It is about marital stress, marital problems, isolation, deprivation, poverty and, above all, unemployment. Research after research shows a clear connection between job losses—[Interruption]

Madam Deputy Speaker (Miss Betty Boothroyd): Order. I would be very much obliged if those hon. Members who wish to carry on conversations would do so on the other side of the swing doors. We must now get on with the business of the House.

Mr. Hinchliffe: My voice is going, so I will conclude my remarks.
My central point is that the Government take a very narrow view of child protection. Child protection is not just about legal measures but involves wider social and economic policies. It is about poverty, inequality and unemployment. I urge the House not just to look at the


symptoms that have been dealt with by the legislation, but at the causes. Some of those causes are sitting on the Government Benches tonight

Mr. Keith Vaz: The House should pay tribute to my hon. Friend the Member for Wakefield (Mr. Hinchliffe), who began the discussion on the Children Bill and whose speech was interrupted by the suspension of the sitting. As many hon. Members on both sides of the House have said—and as the hon. Member for Chislehurst (Mr. Sims) said in his speech—the Children Bill was an all-party Bill. Indeed, if the former Chancellor of the Exchequer were here today, he would he supporting the measure. One of the features of the Children Bill is the fact that it has been a consensus Bill.
As we all know, it was introduced last November by the Lord Chancellor and received Second Reading in the House of Lords. At that stage it was clear that hon. Members on both sides of the House who were to take part in its deliberations would do so in a constructive and positive way. They would ensure that constructive comments were made concerning the improvement of the Bill. I am delighted to say that when the Bill was considered in the House of Lords and in Standing Committee the response of the lead Ministers both here and in the House of Lords has been remarkably fair.
I hope that it will not damage the hon. and learned Gentleman's career if I pay tribute to the Minister of State at the Department of Health, the hon. and learned Member for Putney (Mr. Mellor), for the way in which he has conducted himself during the passage of the Bill. He has been fair and reasonable. As a relatively new Member of the House, I have occasionally discussed with other more senior colleagues the way in which the Minister has approached the Bill. They were very surprised when I told them that the Minister adjourned the Committee over a crucial aspect of policy in the Bill—the rights of social workers to take emergency action to remove children during periods of stress. He adjourned the Committee and offered us his officials—Rupert and other people who have assisted in the passage of the Bill. We had a long discussion on ways in which we could improve the Bill.
Unfortunately, the Minister could not accept the amendment in my name and that of other hon. Members, which sought to introduce the child production notice. However, he listened to our comments, and came back during the recess and at the start of the new session with constructive suggestions. Until last Wednesday and Thursday he was prepared to discuss with us at great length the circumstances surrounding the child assessment orders. Indeed, he was so reasonable that when he had a visitor from America, the actor Charlton Heston, he was able to bring along Mr. Heston, who has played God in the movies on a number of occasions, and introduce him to members of the Committee. I was disappointed that the all-party nature of the Bill was broken when Charlton Heston was introduced to Conservative Members and not to the Opposition. However, despite that minor circumstance, the Committee proceeded in an all-party fashion.
When the matter was brought before the House last Monday, it was agreed that Members on both sides of the House should co-operate as best as they could in deciding on the many Government amendments. Some people may

regard the fact that the Government tabled more than 400 amendments as a sign of weakness. I do not believe that that was the case. I think that it was a sign that those who drafted the Bill and were responsible for the conduct of the Bill were concerned to ensure that the Bill was perfect, simply because we have waited more than 100 years for this radical piece of legislation. The last time that child care law was reviewed to such an extent was more than 100 years ago.
The Bill is a radical measure. It seeks to repeal completely six existing statutes including landmark legislation such as the Children Act 1975. It amends 30 other pieces of legislation——

Mr. Skinner: On a point of order, Madam Deputy Speaker. I know that it is an unusual day and that an afternoon is a long time in politics, but we were wondering about the consequential changes in the Government team. I happen to ask the right hon. and learned Gentleman, who is supposedly the Secretary of State for Health, who is on the Front Bench, whether he has become the Leader of the House. He says he does not know.

Madam Deputy Speaker: Order. Had the hon. Gentleman been doing his duty he should have been listening to the hon. Member for Leicester, East (Mr. Vaz). No breach of our Standing Orders has been committed.

Mr. Skinner: If I may continue——

Madam Deputy Speaker: Order. That is not a genuine point of order.

Mr. Skinner: On another point of order, Madam Deputy Speaker.

Madam Deputy Speaker: It had better be a new one.

Mr. Skinner: Yes, it is. My hon. Friend the Member for Leicester, East (Mr. Vaz) is more interested than many others in the Children Bill, as he has demonstrated several times during the consideration of the Bill. Because he has reservations about the Bill—we have discussed it—he wants to know who is to pilot it through its latter stages. We all want to know. If the Secretary of State for Health has been shifted, there may be consequential changes for those who have piloted the Children Bill. I want to know from the Secretary of State for Health whether he is still in charge.

Madam Deputy Speaker: Order. The hon. Member for Leicester, East is articulate enough to ask the right questions for himself.

Mr. Vaz: I do not know whether the Secretary of State for Health wishes to intervene, but he is free to do so during my speech.

The Secretary of State for Health (Mr. Kenneth Clarke): The hon. Gentleman will be reassured to learn that I am still Secretary of State for Health. I am present because the Bill is part of my departmental responsibility. It is being ably handled by my hon. and learned Friend the Minister for Health.

Mr. Vaz: Will the Secretary of State for Health nod from a sedentary position to indicate whether the Minister for Health will remain in charge of the Bill? I am inviting him to intervene, but he does not wish to do so. I see that he is giggling. The Secretary of State is such a charming person. He was described by my hon. Friend the Member


for Monklands,West (Mr. Clarke) as "Mr. Nice"—or was it "Mr. Nasty"? I cannot remember the description. I assume that the hon. and learned Gentleman will remain in charge of the Bill.
The Bill was designed radically to reform the law on child care. It aims to replace six statutes and amend 30 others.
One of the features of the Bill when it was introduced by the Lord Chancellor in another place was the desire to ensure that it is enacted on a fixed date—1 April 1991. Those involved with child care matters were concerned about the large amount of legislation which had been passed by the House, some of it on an all-party basis, but which had not been brought into effect. Many of the provisions of the Children Act 1975, which was regarded as landmark legislation, have never been brought into effect, and because of the Children Bill they will never be brought into effect. It is important to remember the Lord Chancellor's explanation that when the Bill becomes law it should take effect immediately.
Last week, we had meetings with the Minister for Health and his officials to discuss the crucial rights of social workers to intervene in child care proceedings. With the assistance of the Family Rights Group—I place on record my gratitude for its assistance—I drafted new clause 5, which aimed to change the way in which social workers notify parents of their concerns. My proposal for a child production notice and the Minister's proposal for a child assessment order were discussed at half-past nine last Wednesday in the Cathedral room at the Department of Health. Twenty four hours later, in keeping with the way in which the Minister had approached the Bill, we again discussed with officials the possibility of limiting the amount of time for which the child assessment order should continue. The Minister was prepared to reduce the period of the child assessment order from 14 days to seven.
At that stage, hon. Members registered their first concerns that we were not to be given the full two days to discuss the Bill. One of the reasons why I and other Labour Members who served on the Committee were so co-operative with the Minister and did not speak unnecessarily in Committee was the promise that we would have much time to discuss the Bill on Report.
In Committee,we had lengthy discussions on a new clause moved by the hon. Member for Stockton, South (Mr. Devlin), who is not present, which introduced proposals for a family court. I was pleased to second the proposal because I believed that it was an all-party issue. We took an entire sitting of the Committee to discuss it. We did not press it to a Division because we wanted to consider on Report whether we had had sufficient time to convince the Government of the need for family courts. That is why, when we discussed the allocation of time with the Minister last week, we wanted the two full days that we were promised.
The hon. Member for Batley and Spen (Mrs. Peacock) said that she did not believe that it was right for the two days to be curtailed. At that stage—looking back, it was probably appropriate—the Opposition decided to hold a debate on the economy. Although hon. Members believed that it was necessary to discuss the Children Bill for a full day on Monday and a full day on Tuesday, we accepted the need to discuss the economy. Therefore, we did not

dissent from the fact that a large chunk of Tuesday would be spent discussing the economy, and as a result of the resignation of the Chancellor today that seems to have been an appropriate decision.
We were told that the second discussion on the Children Bill would begin at 10 o'clock on Tuesday evening and continue until 2 am on Wednesday. We were happy to agree to that. Indeed, when I spoke to new clause 1 on Monday evening, I ensured that I kept my remarks to a minimum to enable other clauses to be debated at length. I further ensured that there was no dispute about the way in which we proceeded.
Labour Membersdid not oppose the proposal for child assessment orders, although there were differences among us about how best to proceed, because we did not believe that it would be helpful to do so. I could have pressed a vote on new clause 5. Indeed, I raised a point of order with Mr. Speaker and asked him to call a Division on new clause 5. He said that he did not feel that that was appropriate because the matter had been dealt with by the House agreeing to new clause 13. I did not press the matter to a vote because we had to discuss the 400 amendments introduced by the Government and because it was necessary to prepare for the debate, which was ably and eloquently dealt with by my hon. Friend the Member for Durham, North-West (Ms. Armstrong).
Other hon.Members came into the Chamber to take part in the debate. My hon. Friend the Member for Aberdeen, South (Mr. Doran) raised the issue of transracial adoptions and gave us the benefit of his personal experience. Other hon. Members took part in the debate and raised issues which concerned them. My hon. Friend the Member for Ogmore (Mr. Powell) and others were concerned about grandparents' rights, which is an important issue. Grandparents were left out when representations and rights were allocated under the Children Act 1975.
Before I became an hon. Member, I worked as a senior solicitor for the London borough of Islington. My entire case-load was concerned with child care work. One of the reasons why we decided not to institute proceedings in the juvenile court under the Child Care Act 1980 or the Children and Young Persons Act 1969 but instead to ward children who came within those categories in Islington was that we believed that it was extremely important for grandparents—as interested parties concerned about their grandchildren, and who in many cases looked after them and gave them parental support—to be able to appear before the High Court in wardship proceedings, declare their interests and submit affidavit evidence. That is why I and so many other solicitors in local authorities in London and throughout the country decided to ward. We believed that the High Court was a much better and safer venue to deal with such cases.
Many of my concerns about wardship were met by the amendments tabled by my hon. Friend the Member for Ogmore. I was ready late on Tuesday night to debate grandparents' rights. Labour Members decided to place the arguments before the Minister in the hope that he would take on board our constructive comments and continue in the same spirit in which he began the Bill—a spirit of compromise and reasonableness. We were not able to do that.
In an intervention during the speech of my hon. Friend the Member for Wakefield, the Minister raised his concerns about the activities of the miners group, or


whatever it is called. The Children Bill was so important that we were prepared to sit all night on Tuesday and into the early hours of Wednesday to resolve the matter. My hon. Friend the Member for Bradford, West (Mr. Madden), who has an interest in grandparents' rights, raised this issue. I have re-read his contribution on Second Reading in April this year. The issue was one of the first matters that he raised with the Minister of State.

Mr. Cryer: Does my hon. Friend agree that it would have been necessary for us to sit all through the night to provide the time for debate that was originally agreed—the second of two days? It was only the intervention of an important economic debate, which we initiated and which appears even more important now in the light of present circumstances, that produced a debate on the Children Bill after 10 o'clock, which by virtue of two Divisions meant 10.30 pm. In effect, the Government curtailed debate shortly after the second day of consideration had begun. If we had started at the usual time of half-past 4 or 5 o'clock, that action would have been equivalent to the Government curtailing the debate at, say, 7 or 7.30, which is patently absurd.

Mr. Vaz: My hon. Friend is right. We were prepared to discuss this important measure. Many hon. Members had decided to drive into Westminster that evening. My hon. Friend the Member for Coventry, South-East (Mr. Nellist) told me that he did so because he wanted to raise a number of points. It was no secret that our deliberations were to start at 10 o'clock and go on until 2 o'clock in the morning.
I was surprised when the Minister of State rose in his place and moved that the House should adjourn. I do not think that he wanted to do that. Judging by his handling of the Bill, I believe that he would have liked to proceed. It was not a matter of the hon. Gentleman wanting to get back home. I have lived in Richmond, which adjoins Putney. It takes about 20 minutes to get to Richmond, and I am sure that it takes the hon. Gentleman a similar time to return to his constituency. I believe that he would have liked to continue the discussion, but he is not responsible. He is not yet Leader of the House, although he may be by the end of my speech, so he is not responsible for the way in which the business of the House is managed. The Opposition do not hold him responsible for what happened.
The Opposition were prepared to continue the debate because of the amendments that had been tabled. The House should know about the contribution of the voluntary sector to the passage of the Children Bill. We want it to reach the statute book. I wish that the Minister had accepted my amendment rather than proceeded with the child assessment order, but I accept the decision of the House. As one who has practised law, I feel that it is vital to codify child care law and that, instead of the piecemeal law which has existed for more than a century, there should be one definitive statute to which we and parents can go to find out what the law is. We have a legal duty and a moral responsibility to ensure that the Bill reaches the statute book. We were prepared to sit throughout Tuesday night, into the early hours of Wednesday morning, through lunchtime and into the afternoon to ensure that the Bill was saved. The voluntary sector believed that that was necessary.
As Ministers know, ever since the Lord Chancellor introduced the Bill in the other place, voluntary

organisations have been writing to him, his officials and members of the Committee about the operation of child care law.

Mr. Ray Powell: I appreciate what my hon. Friend says about the Minister's co-operation on the whole Bill. Were any reasons given to my hon. Friend or other members of the Committee as to why the Government wanted to pull stumps at that time in the morning, when the Opposition had offered to debate the whole Bill? The 400-odd Government amendments and other issues which we wanted to raise could have been given a full, open debate. Instead, the Government are trying through the guillotine motion to curtail discussions on certain items on which most of us would like to contribute if there is time.

Mr. Vaz: I was happy to give way to my hon. Friend, who was not in the House when I paid tribute to him——

Mr. Powell: I was.

Mr. Vaz: My hon. Friend was here. I paid tribute to him for his work on the grandparent amendments. The Minister of State gave no reason why the debate had to be adjourned. In his intervention during the speech of my hon. Friend the Member for Wakefield, he said that he did not feel that it was proper for the debate on the Children Bill to proceed while many Divisions were being forced on largely technical amendments. The hon. Gentleman may not have felt that that was an appropriate way to proceed, but the way in which the Government are proceeding now is much worse. What a squalid way to end this landmark piece of legislation. What an appalling way to treat such an important statute. This is not the proper way to proceed on a measure on which there is consensus and to which many people have been waiting many years to contribute.
Before every Committee sitting we met representatives of the voluntary sector, including the Family Rights Group, the Children's Legal Centre, the British Agencies for Adoption and Fostering and the British Association of Social Workers. The Minister and his officials made a great effort and took much time to ensure that they had the support of the Association of Directors of Social Services and the National Society for the Prevention of Cruelty to Children before introducing the new clause on the child assessment order.
I vividly remember the Minister coming before the Committee in the middle of a sitting with a piece of paper and stating that at last the war between the ADSS and the NSPCC about the idea of a child assessment order was over and they were happy with it. Those organisations—two of the most powerful agencies dealing with child work—wrote to us saying that a compromise had been reached. Because of that news, the sitting was adjourned.
Groups such as the well-respected Family Rights Group, which is located in Islington, and the Children's Legal Centre, which had prepared an enormous amount of work through briefing materials and amendments, need to be carried with us. If they know, as the country now knows, that the Government wish to proceed on this historic measure in this squalid way, they will be bitterly disappointed that, after all the concessions and co-operation achieved in the past, this is how it ends.
The hon. Member for Stockton, South (Mr. Devlin) has joined us. I do not know whether during his absence he has issued another press release. During my speech, he made some comments from a sedentary position.

Mr. Tim Devlin: I thank the hon. Gentleman for giving way, because I always enjoy interrupting his speeches. He has said that this is a squalid way to conduct matters. If a guillotine were not imposed on the Bill now, would not the legislation fall at the end of the Session? When I was here last night, the hon. Gentleman said that he was prepared for this important legislation to be carried over into the new Session. He knows as well as I know that many voluntary bodies which have been briefing him and me during the Bill's passage in Committee have been anxious to ensure that the Bill reaches the statute book and is implemented as soon as possible. It is a sad turnaround that the Labour party is prepared to sell this Bill down the river in pursuit of narrow mining interests.

Mr. Vaz: That is the ultimate cheek, coming from the hon. Member for Stockton, South who was not present during the second, late sitting on the Children Bill. The hon. Member told me that he stayed for the Division on child registration fees and then went home because he did not believe that there was anything of importance left to discuss, despite the fact that we have all these amendments to consider. It is a cheek to come to this House, having issued a press release which received a lot of coverage in The Times criticising the Labour Opposition for what they had done.
I am sorry if this is beginning to sound like a mutual admiration society—I assure the House that it will last only for the duration of the Children Bill—but I must again commend the Minister, who was brave enough to repudiate the words of the hon. Member for Stockton, South and issue a denial that any Opposition member of the Committee was responsible for the delay.

Mr. Devlin: It is clear from Hansard that, during that evening's proceedings, an agreement that had been reached was broken. It had not been intended that there would be any further Divisions that evening. That was accepted on both sides of the House. Then a group of Labour Members came to the House, forced a Division in which no Labour Member voted, and subsequently claimed that they had not spoken and had had nothing to do with it. Yet it was quite clear from the atmosphere in the House at the time that that group of hon. Members intended to continue to force Divisions on matters which, until that time, had not been in any way controversial.

Mr. Vaz: The hon. Member for Stockton, South must have bionic sight as he talks about the mood of the House at 1.30 am on Wednesday, when he was not even here but in bed at the Barbican, or wherever his flat is. He could not possibly know the mood of the House. It is no wonder that his colleagues refer to him as the Peter Bruinvels of the current Session. He is not able to be present for the debate but apparently he has no need to take part to judge the mood. What an extraordinary person he must be—although he is away from the House he knows its mood and what agreements have been reached.
Yes, there was an agreement that this issue should be dealt with by 2 am this morning, but because of the passionate debates which had occurred earlier, and because the debate on registration charges went on a little longer than anticipated, the debates proceeded more slowly than had been intended.
The hon. Member cited the support of the voluntary sector. Of course the voluntary sector wants the Bill to become law. Of course we want it on the statute hook. If the hon. Gentleman had been here at the start of my speech he would have known what I said—that we want the Bill to become law as soon as possible. If the hon. Member for Stockton, South has read the Bill—perhaps that is what he is doing now—he will know that the date for its implementation is 1 April 1991, so it will make no difference if it is introduced in the new Session. Members have come to the House to confuse the public by talking about the new Session as though it were 100 years away. As far as I know, prorogation is between 15 and 22 November, which is only a week. If the Government believe that the Bill needs to be considered carefully, it is important that we should take time to ensure that we discuss the amendments in detail.

Mr. Devlin: If the Bill is not passed by the end of this Session, it falls and has to start through all its parliamentary stages once again. As the hon. Member for Leicester, East (Mr. Vaz) knows, because he is a lawyer, there could be a carry—over motion. The hon. Member for Leicester, East has been studying my activities with great care, and has just said that he thought I might he reading the Bill. During many hours in Committee I have had ample opportunity to study the Bill, its provisions and all the amendments, including my own amendment which the hon. Gentleman supported.
On Tuesday the hon. Member for Monklands, West (Mr. Clarke), the Front Bench spokesman for the Labour party, said
That said, however—I say this especially in the presence of the Leader of the House, the Deputy Prime Minister, who is, of course, a reasonable man—when other reasonable hon. Members representing mining areas feel it necessary to demonstrate, as they have done, because they genuinely feel that they have a grievance about Associated British Ports—
which is exactly what the hon. Member for Leicester, East has just said. Then the hon. Member——

Madam Deputy Speaker: Order. This is a very long intervention.

Mr. Devlin: I apologise, Madam Deputy Speaker. The hon. Member for Leicester, East has been watching my actions with great care. I should like to direct him to the next sentence which states that
the Front Benches have endeavoured to co-operate to ensure that the Bill reaches the statute book. That remains our position. I hope, of course, that time will be found in which to continue the Bill's remaining stages. I repeat that our position is that we shall not seek to oppose the Bill. We want to see it on the statute book".—[Official Report, 24 October 1989; Vol. 158, c. 806]:

Madam Deputy Speaker: Order. The hon. Gentleman must come to a conclusion.

Mr. Devlin: I ask the hon. Gentleman what he thinks about that in the light of his remarks.

Mr. Vaz: That intervention does not take us any further. The hon. Member for Stockton, South should put his comments to my hon. Friend the Member for


Monklands, West (Mr. Clarke), who is not able to be present in the House this evening due to pressing constituency business—he has had to attend a funeral—and who was not aware that this issue would be debated this afternoon. The first we knew about it was at 2 am today, when we were here to take part in discussions on the Companies Bill, and I was here to present a petition on the problem of gipsy encampments near my constituency. My hon. Friend the Member for Monklands, West is therefore not able to be here to answer.

Mr. Madden: Despite the bluff and bluster that we have heard from Conservative Members throughout the debate on the guillotine motion, there were hon. Members present during the early hours of Wednesday morning who were willing, able and would have been pleased to complete all the remaining stages of the Children Bill and who would have given it their blessing on its way to the other place.
The other fact that Conservative Members seem to wish to avoid is that, after just two hours of Committee debate, the Minister moved an adjournment motion which the Government carried, despite the fact that 22 Labour Members voted against it, demonstrating their willingness to complete all stages of this important Bill, which we have supported throughout.

Madam Deputy Speaker: Order. This is another very long intervention.

Mr. Vaz: I greatly respect my hon. Friend the Member for Bradford, West (Mr. Madden), who assisted me when I first came into the House when we were on the Immigration Bill Committee together. He has great knowledge of these issues, and he is right. Opposition Members wished to proceed with the debate. I and other hon. Members went into the Division Lobby to ensure that the House did not adjourn. I was happy to stay late last night because I had a petition to present and therefore had to be here.
The hon. Member for Stockton, South talked about the wishes of the voluntary sector. I believe that the voluntary sector wants us to get this Bill right and to take a great deal of time debating and analysing the amendments which have been put forward, quite properly, by the Minister. The voluntary sector believes that it will be a long time before Parliament will find the time and political will to debate these issues again, because we have waited until the very end of this Government's term of office to consider legislation covering children. It is a sign of the fact that it is not given a high priority. If it were, we should have been discussing it in 1979, rather than at this stage.
A Labour Government will clearly be elected at the next general election and will wish to ensure that time is made available, but I am worried that there will be so many other pieces of legislation that we shall have to implement that the children issue and the area of social policy concerning children may not come back again. I assure the Minister that when we come back to new clause 13 the new Labour Government will amend that provision fairly swiftly.
The voluntary sector wants to ensure that the Bill is a good Bill and that all the technical difficulties have been sorted out. A short delay at the final stage would not go amiss. As the hon. Member for Stockton, South knows, the Minister of State was in negotiation with Labour Members and others in Committee. His officials had emergency meetings with the Association of Directors of

Social Services and the National Society for the Prevention of Cruelty to Children last Thursday evening to get through the provision on the child assessment order. Had we waited another week, the period of seven days for child assessment orders might have come down to three days as a result of the negotiations taking place. A short delay might well have been in order.
The hon. Member for Stockton, South says that the House will have to introduce a carry-over motion. I do not know what a carry-over motion is, but I accept that the hon. Gentleman has read the necessary documents. I am sure that the Leader of the House and the shadow Leader of the House, my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson), could come to some arrangement to enable us to agree a carry-over motion so that the Bill could be dealt with after the new Session begins.
We must bear in mind our long wait for the Bill and the fact that it will not even come into effect until 1 April 1991, because many of its provisions need to be the subject of scrutiny by local authorities and many of the provisions concerning legal proceedings and the amendments introduced by the Solicitor-General require rules of court. It is not possible to implement the Children Bill unless the rules of court have been sorted out.
The hon. Member for Stockton, South, as a lawyer, will remember that those points were raised in Committee when we discussed the need to have the Government's proposals brought before the Committee so that we could discuss issues such as the time necessary for the local authority to serve a notice on parents. We had a discussion on time limits. When I pressed the Minister in Committee on why he had suggested a period of 72 hours as the necessary time for a parent to challenge an emergency protection order, he said that he had to come to some decision on time. He had decided on 72 hours because it was a reasonable time and he believed that it gave parents a reasonable chance to challenge the order that was to be made. He then went on to promise me and the other members of the Committee that rules of court would be made. That shows that there is plenty of time to decide on the necessary rules of court and plenty of time in which to conduct negotiations on the most appropriate time available.

Mr. Robert Key: It is important to clear up this matter. As I understand it, there is no way in which there could be a carry-over motion. There is no question of the Bill being able to go into the next Session. If we do not get it now, we shall not get it at all. I think that you, Madam Deputy Speaker, can confirm that no carry-over motion is possible. Either we get the Bill this Session, or it is lost.

Madam Deputy Speaker: That is the case. I refer the House to the proposal for suspending or resuming Bills. Proposals have been made for provision either by statute or by Standing Orders for the suspension of public Bills from one Session to another or for resuming proceeding upon such Bills, notwithstanding a Prorogation. There is no mechanism by which there can be a carry-over motion for a public Bill. It is up to the Government to get their Bill through during this Session.

Mr. Vaz: I am most grateful to you, Madam Deputy Speaker, your Clerk and the hon. Member for Salisbury (Mr. Key) for correcting the misleading information given


by the hon. Member for Stockton, South. It is so reminiscent of Peter Bruinvels in Leicester that the information given was clearly not necessarily correct.

Mr. Madden: I am grateful for the advice that you gave the House, Madam Deputy Speaker. Will you also confirm that there was no impediment to the Bill completing its Report stage and Third Reading during the early hours of Wednesday morning?

Madam Deputy Speaker: The hon. Gentleman cannot tempt the Chair down that road. I have given a factual statement about carry-over motions.

Mr. Vaz: Obviously, we accept your advice and I am grateful to you, Madam Deputy Speaker.

Madam Deputy Speaker: Order. It is not advice—it is fact.

Mr. Vaz: I am grateful for the facts that you have given, Madam Deputy Speaker, and to the Clerk for researching the point. In view of that, I urge the Government to look at the business of the House until 15 November. We now know when the Queen's Speech will be, so we can decide on our priorities. If the Children Bill is a priority, as I believe it is, it is necesary to remove some of the other pieces of legislation proposed for the next three weeks. I suggest the Football Spectators Bill, for example. I was a member of the Committee on that Bill and I believe that if the Minister spoke to his hon. Friend the Minister for Sport and suggested that the Bill should wait until the new Session, when we have the Taylor report, the Children Bill could be debated for the whole of Friday, which would give us sufficient time.
It is important that we hear the Minister's response. However, I want to mention one point that will be discussed tomorrow because, unfortunately, I shall not be able to be in the House tomorrow afternoon to make the point then. We need a discussion on wardship. The Minister of State has said often that he accepts the advice given by the NSPCC. Its advice at present is that clause 84 should be amended and that the Government should delay the implementation of the wardship provisions. The Opposition, the NSPCC and other voluntary organisations do not believe that wardship should be curtailed. I urge the Minister to consider that point.
This is a squalid way to end a Bill of such importance, but there is a way out. I accept the guidance that you have given, Madam Deputy Speaker, and I ask the Government and the Minister, in all honesty, to find the extra time that we need next week to discuss the Children Bill. It is a very important piece of legislation and it is unlikely that we shall return to consider this area of law for many decades to come.

Mr. Alan Williams: My hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) in his opening speech this afternoon described the situation as a shambles. Subsequent events perhaps have rather dwarfed this debate and given it an element of anticlimax, but they do not alter the fact that we are discussing the chaotic position of the Government's legislation. I would wager that what the Prime Minister said at Kuala Lumpur

was a model of diplomacy compared with what she said to her Leader of the House and her Chief Whip when she returned to London yesterday.
I recall an item in, of all newspapers, one much liked by Conservative Members—The Sun—which said five years ago:
Come home, Maggie. Rarely can any bunch of Government Ministers have presented such a spectacle of bungling, pathetic incompetence as was unveiled at Westminster yesterday.
At the centre of this comedy of errors—or, more accurately, tragedy of errors—was the hapless Sir Geoffrey Howe…Has someone stolen his political judgment, or his political instincts?
Although that was written five years ago, it could have been rerun this morning and it would have been absolutely relevant.
But what happened last night at midnight? The Leader of the House recovered his diplomatic touch. He crept in here when he thought that no one would notice and at a stroke destroyed the links and the channels between the Opposition and the Government. He abandoned them unilaterally and arbitrarily. He came with a statement about which he had not warned us and he introduced not one but two guillotines about which he had not told us. All that was done without warning and without discussion. His actions were arbitrary and unilateral—exactly the same as those that he pursued at GCHQ when he tore up existing agreements.
The right hon. and learned Gentleman skulked in here and launched on the House his double-bladed guillotine. His timing was superlative. We are in the final two weeks of the Session and the date for the one state opening of Parliament has been set. This is the time that the Government most need the co-operation of the Opposition, but the right hon. and learned Gentleman managed to destroy it. If we now echoed what he did to us last night, the Government would already be dismantling the arrangements for the State opening of Parliament.
The Prime Minister must dread going away—that is even more apposite in view of today's events. I have a cartoon with me from the Sunday Express which appeared five years ago at the same time as the quote that I read from The Sun. It shows two monks carrying candles in some vaults peering into a barrel and saying:
You can't hide here for long, Sir Geoffrey. She'll get you sooner or later now she's back".
She got him just before midnight last night and we are now debating the consequences. At least we should give the man credit. He has beeen in the job for three months and he is already in the record books. In this one Session of Parliament eight guillotines have been introduced. Today, when we complained about lack of time, the right hon. and learned Gentleman had the impudence to suggest that we should guillotine the two guillotines by not taking the full three hours to debate the motion.
I do not blame the Minister for Health. I have been impressed by the good will he has engendered on our Benches. The biggest obstacle to both Bills has been the Government, not the Opposition. The problem is not just the number of amendments tabled, but their sheer complexity and intricacy. The Children Bill attracted 38 pages of amendments and the Companies Bill 99 pages. The Government then complain that we wasted 15 minutes on what they considered an unnecessary vote.
By the time we finished at 11.26 pm on Monday, we had dealt with 293 amendments and new clauses to the


Children Bill—288 of which had been tabled by the Government. The following night, however, at 1.30 am, well before any agreed deadline, the Minister moved the adjournment of the debate. We voted against that and a study of the vote shows that only 110 Tory Members voted, among whom there were only 19 Ministers or Whips. The debate was adjourned because the Leader of the House and the Chief Whip panicked. They were afraid that they would not be able to muster 100 Tory Members to vote and, despite our willingness to continue, they ended the debate. The sole excuse that they could offer was that we had dared to have one vote—there were not attendant speeches—which took up 15 minutes on an item which the Government considered did not warrant a vote. That is a measure of the indictment against us.

Mr. Devlin: rose

Mr. Williams: I have little time available to me. The hon. Gentleman has already made his speech. Earlier, I wondered whether I should interject in his interjection.
The Government have also complained about the Companies Bill, but who came here with a statement that lasted an hour and a quarter before we started our deliberations on that Bill? We did not do that—they did. Who tabled 300 amendments on the day of the debate? Not us. The Government should not pretend that the Opposition are responsible for the chaos, as they made the Bill up as they went along. On the last day of our deliberations in Committee, the Minister tabled 15 new clauses. In effect, those new clauses represented a new Financial Services Bill, but the Opposition were not given time to debate them. The Companies Bill is such a masterpiece of the draftsman's art that the Government have moved 1,100 amendments altogether—400 in the Lords, 400 in Committee and 300 yesterday. Now 700 of those amendments must go back to the Lords, so we shall start the process all over again. It is the Government, not the Opposition, who have sabotaged the Bill. They have drowned it in amendments.
I accept that much of the responsibility rests with the Chief Whip and perhaps with Ministers rather than with the Leader of the House. When the Prime Minister appointed the right hon. and learned Gentleman, she might have felt that she now had a winning team in charge of Government business. I am afraid that she must have a poor memory. What a Session the next one promises to be if the right hon. and learned Gentleman remains in post.
The right hon. and learned Gentleman's credentials are exciting and, five years ago, they were noted by the newspapers. The Daily Telegraph, no great supporter of us, ran the headline:
Howe centre of Tory disarray
The Guardian carried the headline:
The disaster zone around Geoffrey Howe".
The Sun noted:
Fury as Howe slips up again".
The Daily Mirror ran the headline, "Howe blunder", the Sunday Mirror spoke of a "Whitehall farce" and the main headline in The Timesread, "Embarrassed Howe". My favourite headline is one that appeared on the front page of the Daily Mirror. It showed a photograph of the right hon. and learned Gentleman as though standing on his head and the headline ran:
Dear Sir Geoffrey…Have you ever had one of those weeks when nothing goes right?

That takes us back to where we started when I quoted from The Sun. The Daily Mirror should rerun that headline tomorrow as it is every bit as relevant today as it was five years ago.
We do not yet know what the right hon. and learned Gentleman will be doing in the next Session, but let us remember that the man who helped to create this mess is the man who sank the economy in one Budget. He is the man who bungled the GCHQ sackings so badly that he gave the Government the worst three days of headlines that they have ever had—until, I suspect, the three days that are about to come. This is the man who will be in charge of the business of the House—we think—for the next 12 months. It promises to be an exciting year for me.
Last night, the right hon. and learned Gentleman demonstrated his fine touch. I look forward to the new Session, assuming that the right hon. and learned Gentleman is not in charge of a nuclear power station in the Outer Hebrides.

The Minister for Health (Mr. David Mellor): If a week is a long time in politics, I have found that three hours is equally long. I appreciate that some of the interest in this debate may have dissipated during its course. I congratulate all of those who, notwithstanding the eruptions around them, nevertheless sought to keep their eye on the ball. I shall seek to follow in that noble tradition, although I shall not criticise the House if, on this occasion, hon. Members find other matters more compelling than my oratory to talk about. I shall do my best to play out elegantly the time remaining in the debate.
We agree about a lot of things this evening, not least that it is important that the Children Bill should go on the statute book. Far too much work has been done on the Bill for it to be lost. I am grateful that the co-operation across the Chamber on this Bill has been recognised. Such recognition is always the first thing to go out of the window when things get tough. There has been genuine co-operation on the Bill. I have no complaint against the hon. Member for Monklands, West (Mr. Clarke) or the hon. Member for Durham, North-West (Ms. Armstrong), who have worked extremely hard on the Bill. They were supported by an able team in Committee. I believe that the Bill, as it emerged from Committee, is stronger for the careful consideration it was given during 17 sittings.
I believe, however, that there was something missing from the speech of the right hon. Member for Swansea, West (Mr. Williams). He did not recognise the new factor that entered into our discussions at 10.30 pm on Tuesday. We had arranged for the Children Bill to pass into law. However, an unnecessary Division was called by two hon. Members. Whatever other involvements they have in this House—and both are active hon. Members—neither had been active in our deliberations on the Children Bill. They were plainly activated by a grievance other than any objections to the inoffensive technical amendment under consideration. Both the hon. Members for Monklands, West and for Middlesbrough (Mr. Bell) candidly acknowledged that the dispute was about the Associated British Ports Bill and said that it was likely that several Divisions would be called—not because of any objections to what was being proposed by the Government, but simply to advance that grievance.
That is a parliamentary tactic for which there are precedents. However, one parliamentary tactic may be met by another kind of parliamentary tactic and the tactic now being deployed is that of confining the debate. It is being done for three reasons. Once we move from the necessary battle lines that have to be drawn in the artificial huff and puff that has characterised the past three hours—fun though it has been for all kinds of reasons—I imagine that we can agree about those three things.
First, the Bill is necessary. It has been a good thing that, in the course of a busy Session, it has proved possible to find the time for a Bill that could easily have been squeezed out by other more contentious measures. As the hon. Member for Leicester, East (Mr. Vaz) eloquently said, we will not have the chance to return to this issue for quite some time, and we cannot afford to lose the Bill. It must become law.
Secondly, we have to acknowledge the price that has had to be paid. First, there is the care and skill that the parliamentary draftsmen have brought to bear on the legislation. Secondly, as changes have been made in deference to the wishes of the House, the Bill needs to be further considered in the Lords. It is therefore necessary that the Bill is delivered to the other place in good time to allow that consideration to take place. It cannot be left hanging around any more than can the Companies Bill.
Thirdly—this point is highly relevant—there was an arrangement through the usual channels that the Bill must be completed, notwithstanding the amount of time that had been eaten into as a result of the emergency motion on the economy on Tuesday. Perhaps Friday should have been chosen for that debate, but there we are, it happened on Tuesday. Indeed, we know that the Bill's passage could have been completed already if common sense had prevailed among hon. Members throughout the House.
Notwithstanding the fact that it has been necessary to curtail our debate on the Bill, we still have three hours of debate tomorrow. That is actually more than the time that it was originally envisaged that the Bill would take to complete once the last contentious piece of business had been disposed of. There would also have been plenty of time for the Companies Bill to be further considered tonight if it had not been for the point that was argued at length in the House yesterday evening, which in itself was not contentious.
It has been suggested that there was some doubt about whether it would have been possible for us to complete our progress on the Children Bill. There was also some doubt about whether the Government could move as they did. Any doubt that might have existed about whether progress was possible must surely have been washed away by what happened in the House last night when some of the following exchanges took place—[Interruption.]

Mr. Speaker: Order.

Mr. Mellor: I know that the House remains riveted by the problems of the Companies Bill. I remind hon. Members that at the bottom of page 4 clause 2 contains the words.
in the case of a company incorporated after the commencement of that Part, the last day of the month in which the anniversary of its incorporation falls.
A deeply radical and searching amendment of the utmost controversy was tabled in which it was suggested that the

word "Part" should be removed and the word "Section" be inserted. One might have assumed that that would pass relatively unnoticed, but no. It caused a Division that took 20 minutes of parliamentary time. Then, lo and behold, if we move on to clause 4(2), we find that it states:
Schedule 4 to the Companies Act 1985…is amended in accordance with Schedule 1.
Again, a deeply damaging amendment was tabled by the Government that would have added the words "to this Act" to the end of that sentence, yet notwithstanding the relative inoffensiveness of those words a Division was forced.
It was perfectly obvious that, whatever else was motivating hon. Members last night. it was not a deep concern about improving the Companies Bill. That was made abundantly clear by the fact that the Tellers for those Divisions were not the official Opposition Tellers, but were from the group concerned about the Associated British Ports Bill.
There are many precedents for guillotines in the House. Indeed, on one famous occasion the right hon. Member for Blaenau Gwent (Mr. Foot) managed to bring five guillotines to the House in one evening. When pressed about that in a debate last year, he said:
Those five guillotines were introduced on 20 July. That is quite late in the Session. If we had not had the guillotine motions, all those five measures would have been destroyed. There is not the slightest doubt about that."—[Official Report, 22 February 1988; Vol. 128, c. 39.]
From that impeccable parliamentary source has come the reason for tonight's guillotine.

Question put:—

The House divided: Ayes 195, Noes 98.

Division No. 354]
[7.46 pm


AYES


Alexander, Richard
Clarke, Rt Hon K. (Rushcliffe)


Amess, David
Colvin, Michael


Amos, Alan
Conway, Derek


Arbuthnot, James
Coombs, Anthony (Wyre F'rest)


Arnold, Jacques (Gravesham)
Coombs, Simon (Swindon)


Atkinson, David
Cormack, Patrick


Baker, Rt Hon K. (Mole Valley)
Couchman, James


Baker, Nicholas (Dorset N)
Cran, James


Baldry, Tony
Davies, Q. (Stamf'd &amp; Spald'g)


Batiste, Spencer
Davis, David (Boothferry)


Bennett, Nicholas (Pembroke)
Day, Stephen


Benyon, W.
Devlin, Tim


Blaker, Rt Hon Sir Peter
Dicks, Terry


Boscawen, Hon Robert
Dover, Den


Boswell, Tim
Dunn, Bob


Bottomley, Mrs Virginia
Durant, Tony


Bowden, A (Brighton K'pto'n)
Evennett, David


Bowis, John
Fallon, Michael


Braine, Rt Hon Sir Bernard
Favell, Tony


Brazier, Julian
Fenner, Dame Peggy


Brown, Michael (Brigg &amp; Cl't's)
Fishburn, John Dudley


Bruce, Ian (Dorset South)
Fookes, Dame Janet


Buck, Sir Antony
Forman, Nigel


Burns, Simon
Forsyth, Michael (Stirling)


Burt, Alistair
Forth, Eric


Butcher, John
Fowler, Rt Hon Norman


Butler, Chris
Fox, Sir Marcus


Butterfill, John
French, Douglas


Carlisle, John, (Luton N)
Gale, Roger


Carlisle, Kenneth (Lincoln)
Gardiner, George


Carrington, Matthew
Garel-Jones, Tristan


Carttiss, Michael
Gill, Christopher


Cash, William
Glyn, Dr Alan


Channon, Rt Hon Paul
Goodhart, Sir Philip


Chapman, Sydney
Goodlad, Alastair


Chope, Christopher
Goodson-Wickes, Dr Charles


Clark, Dr Michael (Rochford)
Gorman, Mrs Teresa


Clark, Sir W. (Croydon S)
Grant, Sir Anthony (CambsSW)






Greenway, Harry (Eating N)
Newton, Rt Hon Tony


Greenway, John (Ryedale)
Norris, Steve


Gregory, Conal
Oppenheim, Phillip


Griffiths, Peter (Portsmouth N)
Page, Richard


Ground, Patrick
Paice, James


Grylls, Michael
Patnick, Irvine


Gummer, Rt Hon John Selwyn
Pattie, Rt Hon Sir Geoffrey


Hague, William
Pawsey, James


Hamilton, Hon Archie (Epsom)
Peacock, Mrs Elizabeth


Hamilton, Neil (Tatton)
Porter, Barry (Wirral S)


Hampson, Dr Keith
Porter, David (Waveney)


Hanley, Jeremy
Portillo, Michael


Hargreaves, Ken (Hyndburn)
Powell, William (Corby)


Haselhurst, Alan
Raison, Rt Hon Timothy


Hawkins, Christopher
Redwood, John


Hayes, Jerry
Riddick, Graham


Hayhoe, Rt Hon Sir Barney
Ridley, Rt Hon Nicholas


Hayward, Robert
Rossi, Sir Hugh


Heathcoat-Amory, David
Sainsbury, Hon Tim


Higgins, Rt Hon Terence L.
Shaw, David (Dover)


Howarth, G. (Cannock &amp; B'wd)
Shephard, Mrs G. (Norfolk SW)


Howe, Rt Hon Sir Geoffrey
Shersby, Michael


Hughes, Robert G. (Harrow W)
Sims, Roger


Hunt, Sir John (Ravensbourne)
Smith, Tim (Beaconsfield)


Hunter, Andrew
Soames, Hon Nicholas


Irvine, Michael
Squire, Robin


Jack, Michael
Stanbrook, Ivor


Jackson, Robert
Steen, Anthony


Janman, Tim
Stern, Michael


Jessel, Toby
Stewart, Andy (Sherwood)


Johnson Smith, Sir Geoffrey
Stradling Thomas. Sir John


Jones, Gwilym (Cardiff N)
Tapsell, Sir Peter


Key, Robert
Taylor, John M (Solihull)


Kilfedder, James
Taylor, Teddy (S'end E)


Kirkhope, Timothy
Tebbit, Rt Hon Norman


Knapman, Roger
Thompson, D. (Calder Valley)


Knight, Greg (Derby North)
Thompson, Patrick (Norwich N)


Knight, Dame Jill (Edgbaston)
Thurnham, Peter


Knowles, Michael
Townsend, Cyril D. (B'heath)


Lester, Jim (Broxtowe)
Tracey, Richard


Lord, Michael
Twinn, Dr Ian


Lyell, Sir Nicholas
Waddington, Rt Hon David


Macfarlane, Sir Neil
Walden, George


MacGregor, Rt Hon John
Waller, Gary


Maclean, David
Ward, John


McNair-Wilson, Sir Patrick
Wardle, Charles (Bexhill)


Malins, Humfrey
Warren, Kenneth


Mans, Keith
Watts, John


Maples, John
Wheeler, John


Marshall, John (Hendon S)
Widdecombe, Ann


Martin, David (Portsmouth S)
Wiggin, Jerry


Maxwell-Hyslop, Robin
Winterton, Mrs Ann


Mellor, David
Winterton, Nicholas


Meyer, Sir Anthony
Wood, Timothy


Mills, lain
Yeo, Tim


Mitchell, Sir David
Young, Sir George (Acton)


Morris, M (N'hampton S)
Younger, Rt Hon George


Morrison, Sir Charles



Moss, Malcolm
Tellers for the Ayes:


Moynihan, Hon Colin
Mr. Stephen Dorrell and


Needham, Richard
Mr. Tom Sackville.


Nelson, Anthony





NOES


Allen, Graham
Campbell, Ron (Blyth Valley)


Archer, Rt Hon Peter
Campbell-Savours, D. N.


Armstrong, Hilary
Clay, Bob


Ashdown, Rt Hon Paddy
Clwyd, Mrs Ann


Ashton, Joe
Cohen, Harry


Banks, Tony (Newham NW)
Corbyn, Jeremy


Barnes, Harry (Derbyshire NE)
Cousins, Jim


Beith, A. J.
Cox, Tom


Bell, Stuart
Cryer, Bob


Benn, Rt Hon Tony
Cummings, John


Bennett, A. F. (D'nfn &amp; R'dish)
Darling, Alistair


Bermingham, Gerald
Dewar, Donald


Brown, Nicholas (Newcastle E)
Dixon, Don


Bruce, Malcolm (Gordon)
Dobson, Frank


Buchan, Norman
Doran, Frank


Campbell, Menzies (Fife NE)
Dunwoody, Hon Mrs Gwyneth





Eastham, Ken
Morgan, Rhodri


Fearn, Ronald
Mowlam, Marjorie


Fields, Terry (L'pool B G'n)
Nellist, Dave


Flannery, Martin
Orme, Rt Hon Stanley


Flynn, Paul
Owen, Rt Hon Dr David


Foster, Derek
Patchett, Terry


Foulkes, George
Powell, Ray (Ogmore)


Fyfe, Maria
Prescott, John


Galloway, George
Quin, Ms Joyce


Garrett, John (Norwich South)
Randall, Stuart


George, Bruce
Reid, Dr John


Golding, Mrs Llin
Richardson, Jo


Gould, Bryan
Robinson, Geoffrey


Griffiths, Win (Bridgend)
Ross, Ernie (Dundee W)


Haynes, Frank
Ruddock, Joan


Heffer, Eric S.
Sheerman, Barry


Hinchliffe, David
Skinner, Dennis


Hughes, John (Coventry NE)
Smith, Rt Hon J. (Monk'ds E)


Hughes, Simon (Southwark)
Soley, Clive


Illsley, Eric
Spearing, Nigel


Johnston, Sir Russell
Steel, Rt Hon David


Jones, Barry (Alyn &amp; Deeside)
Taylor, Mrs Ann (Dewsbury)


Kennedy, Charles
Vaz, Keith


Kinnock, Rt Hon Neil
Wall, Pat


Kirkwood, Archy
Wallace, James


Leighton, Ron
Welsh, Andrew (Angus E)


Livsey, Richard
Welsh, Michael (Doncaster N)


Lofthouse, Geoffrey
Williams, Rt Hon Alan


Macdonald, Calum A.
Winnick, David


Maclennan, Robert
Wise, Mrs Audrey


Madden, Max
Wray, Jimmy


Meacher, Michael



Meale, Alan
Tellers for the Noes:


Michie, Bill (Sheffield Heeley)
Mr. Robert N. Wareing and


Michie, Mrs Ray (Arg'l &amp; Bute)
Mr. Martyn Jones.


Molyneaux, Rt Hon James

Questions accordingly agreed to.

Resolved
That the following provisions shall apply to the remaining proceedings on the Companies Bill [Lords] and the Children Bill [Lords]:—

Report and Third Reading

COMPANIES BILL [Lords]

1.—(1) The proceedings on Consideration and Third Reading of the Companies Bill [Lords] shall be completed in one allotted day and shall be brought to a conclusion at the Times shown in the following Table:—

TABLE


Proceedings
Time for conclusion of proceedings


New Clause, new Schedules and amendments relating to Parts I to IV of the Bill.
9 50 pm


New Clauses, new Schedules and amendments relating to Part V of the Bill.
11.00 pm


New Clauses, new Schedules and amendments relating to Parts VI and VII of the Bill.
Midnight


Remaining new Clauses and amendments and Third Reading.
1.00 am

CHILDREN BILL [LORDS]

2. The proceedings on Consideration and Third Reading of the Children Bill [Lords] shall be completed in one allotted day and shall be brought to a conclusion three hours after the commencement of adjourned proceedings on consideration.

Dilatory Motions

3. No dilatory Motion with respect to, or in the course of proceedings on either Bill shall be moved except by a member of the Government, and the Question on any such Motion shall be put forthwith.

Order of proceedings

4. No Motion shall be made to alter the order in which proceedings on Consideration of either Bill are taken

Extra time on allotted days

5. Paragraph (1) of Standing Order No. 14 (Exempted business) shall apply to the proceedings on both Bills.

Conclusion of proceedings

COMPANIES BILL [Lords]

6.—(l) For the purpose of bringing to a conclusion any proceedings on the Companies Bill [Lords] which are to be brought to a conclusion at a time appointed by this Order and which have not previously been brought to a conclusion, Mr. Speaker shall forthwith put the following Questions (hut no others)—
(a) any Question already proposed from the Chair;
(b) any Question necessary to bring to a decision a Question so proposed (including, in the case of a new Clause or new Schedule which has been read a second time, the Question that the Clause or Schedule be added to the Bill);
(c) the Question that all new Clauses standing in the name of, or moved by, a member of the Government and all new Schedules standing in the name of a member of the Government be added to the Bill;
(d) the Question that all remaining amendments standing in the name of, or moved by, a member of the Government be made to the Bill;
(e) any other Question necessary for the disposal of the business to be concluded.

(2) Proceedings under sub-paragraph (1) above shall not be interrupted under any Standing Order relating to the sittings of the House.

CHILDREN BILL [Lords]

7.—(1) For the purpose of bringing to a conclusion any proceedings on the Children Bill [Lords] which are to be brought to a conclusion at the time appointed by this Order and which have not previously been brought to a conclusion, Mr. Speaker shall forthwith put the following Questions (but no others)—
(a) any Question already proposed from the Chair;
(b) any Question necessary to bring to a decision a Question so proposed (including, in the case of a new Clause or new Schedule which has been read a second time, the Question that the Clause or Schedule be added to the Bill);
(c) the Question that all new Clauses and new Schedules standing in the name of a member of the Government be added to the Bill;

(d) the Question that all remaining amendments standing in the name of a member of the Government be made to the Bill;
(e) any other Question necessary for the disposal of the business to be concluded.

(2) Proceedings under sub-paragraph (i) above shall not be interrupted under any Standing Order relating to the sittings of the House.

Supplemental orders

8.—(1) The proceedings on any Motion moved by a member of the Government for varying or supplementing the provisions of this Order shall, if not previously concluded, be brought to a conclusion one hour after they have been commenced, and paragraph (1) of Standing Order No. 14 (Exempted business) shall apply to the proceedings.

(2) If the House is adjourned, or the sitting is suspended, before the time at which proceedings on either Bill are to be brought to a conclusion under this Order no notice shall be required of a Motion moved at the next sitting by a member of the Government for varying or supplementing the provisions of this Order.

Saving

9. Nothing in this Order—
(a) prevents any proceedings to which it applies from being taken or completed earlier than is required by the Order; or
(b) prevents any business (whether on the Bill in question or not) from being proceeded with after the completion of all such proceedings on that Bill.

Re-committal

10. No debate shall be permitted on any Motion to re-commit either Bill (whether as a whole or otherwise), and Mr. Speaker shall put forthwith any Question necessary to dispose of the Motion, including the Question on any amendment moved to the Question.

Interpretation

11. In this Order "allotted day", in relation to the Companies Bill [Lords] or the Children Bill [Lords] means any day on which that Bill is put down as first Government Order of the day, provided that a Motion for allotting time to the proceedings on the Bill to be taken on that day either has been agreed on a previous day, or is set down for consideration on that day.

Chancellor of the Exchequer (Resignation)

The Lord President of the Council and Leader of the House of Commons (Sir Geoffrey Howe): rose——

Hon. Members: On a point of order, Mr. Speaker.

Mr. Speaker: What is the point of order?

Mr. Eric S. Heller: On a point of order, Mr. Speaker. I understand that we are going to hear a statement from the deputy Prime Minister. Have you been informed of why the Prime Minister is not present?

Mr. Speaker: Who makes statements from the Front Bench has never been a matter for the Chair.

Sir Geoffrey Howe: With permission, Mr. Speaker, I wish to make—[Interruptionl]

Mr. Speaker: Order. These are grave matters.

Sir Geoffrey Howe: With permission, Mr. Speaker——

Mr. Malcolm Bruce: On a point of order, Mr. Speaker.

Mr. Speaker: What is the point of order at this stage of the proceedings?

Mr. Bruce: In view of the seriousness of the situation, is it really fit, when the City may be in crisis, for this statement to be made in the absence of the Prime Minister? Could she not be in the House?

Mr. Speaker: The hon. Gentleman evidently did not hear what I said—that it is not for me to state who makes statements from the Government Front Bench.

Sir Geoffrey Howe: With permission, Mr. Speaker, I wish to make a brief statement to the House. As the House will be aware, my right hon. Friend the Member for Blaby (Mr. Lawson) has resigned as Chancellor of the Exchequer. My right hon. Friend the Prime Minister learned of his intention to resign just before 2.30, immediately before she went over to the House to prepare for Questions and her statement on the Commonwealth Heads of Government meeting. In the course of a subsequent conversation between them following her return to No. 10 Downing street, the Prime Minister was unable to dissuade my right hon. Friend. The decision was therefore announced at about 6 pm and the letters that have been exchanged have since been published.
My right hon. Friend the Prime Minister has decided to appoint my right hon. Friend the Member for Huntingdon (Mr. Major) as Chancellor of the Exchequer, my right hon. Friend the Member for Witney (Mr. Hurd) as Secretary of State for Foreign and Commonwealth Affairs and my right hon. and learned Friend the Member for Ribble Valley (Mr. Waddington) as Secretary of State for the Home Department. There is no change in the successful economic policies—[Interruption.]—that the Government have pursued in the past and will continue to pursue in the future. In due course the House will no doubt wish to return to the business on which we have just been voting.

Mr. Frank Dobson: I thank the deputy Prime Minister for his statement. The Chancellor's resignation clearly resulted from the Prime

Minister's high-handed, intolerable and disloyal treatment of Cabinet colleagues. Her subsequent decision to shift the newly appointed Foreign Secretary to be the new Chancellor showed a great office of state being cast off and passed around like an old coat. It undermines confidence in the Prime Minister's claim to be fit to conduct the nation's affairs. More important, it may undermine confidence in our economy, our currency and our country.
The underlying problems of the economy cannot swiftly be resolved, but changes in the personalities involved will not restore confidence. Changes in policy are required. It is imperative that, at the earliest opportunity, the Government put before the House their proposals to deal with the deepening economic crisis which they have ignored for far too long. The Government must answer to the House. In so doing, they will answer to the people of this country. Tonight, our people, all our people, must wonder what lies ahead for their homes, their jobs, their families and their future. They have already paid too high a price for the consequences of public squabbles between the highest in the land. The Prime Minister must accept responsibility for what has happened. She must answer to the House and to the country, and she must answer soon.

Sir William Clark: Will my right hon. and learned Friend take it from me that we on this side of the House very much regret the resignation of the Chancellor of the Exchequer? May I press my right hon. and learned Friend to take no notice of the obvious glee with which the Opposition received that news, culminating in the singing of "The Red Flag"? Does he agree that the basic economy of the country is still sound despite the resignation? We welcome my right hon. Friend the Member for Huntingdon (Mr. Major) to his job as the new Chancellor of the Exchequer, because we know that the sound policies that the Government have pursued over the years will continue. Consequently, there is no necessity for the City or the markets to get panicky.

Sir Geoffrey Howe: I join my hon. Friend in paying tribute to the long and magnificent service to the Government and the country given by our right hon. Friend the Member for Blaby. I join him also in expressing confidence in his successor, our right hon. Friend the Member for Huntingdon. I shall respond to the shadow Leader of the House by saying that the reasons for the changes are exactly as stated in the letters of integrity exchanged between my right hon. Friends. The economic policies of the Government will remain unchanged, effective and sensible, exactly as set out by my hon. Friend. The one thing that will enable the people of the country to continue to sleep soundly is the certainty that there is no prospect of our economic policies being replaced by those of the Opposition.

Mr. Paddy Ashdown: I suspect that many hon. Members feel a good deal of sympathy for the right hon. Member for Blaby (Mr. Lawson) whose job has been made impossible, whose position has been made untenable and who has taken the only honourable course open to him. Does the Leader of the House not realise that what is at stake is not the position of the Chancellor of the Exchequer but the integrity of the Government and of a Prime Minister who has shown herself to be arrogant, dictatorial and isolated? We have been told for the last 10 years that there is no alternative. There is an alternative. She must go.

Sir Geoffrey Howe: The integrity of the Government is well maintained by the quality of the appointments that I have just disclosed to the House. Each one of my right hon. Friends moving into these important offices of state has long and substantial experience in those fields. The House may rest assured that the integrity of the Government is in good hands and will remain so.

Mr. Norman Tebbit: Does my right hon. and learned Friend accept that, in what might have been for him the difficult moment of making his statement, he had the great advantage of the hon. Member for Holborn and St. Pancras (Mr. Dobson) coming to his aid—in the same way as the Leader of the Opposition normally comes to the aid of the Prime Minister? Will he take it from the House, from all of us I believe, that we wish my right hon. Friend the Member for Blaby (Mr. Lawson) well in whatever activities he engages in ? [Interruption.] At least we on this side of the House appreciate the work that he has done. Will my right hon. and learned Friend also convey our best wishes to those who have now taken over the heavy burdens of high office that he listed in his statement? Will he take to the Prime Minister a message of thanks that we have been assured that the economic policies of the Government will not change one jot?

Sir Geoffrey Howe: I will certainly convey those sentiments, firmly expressed by my right hon. Friend, not only to the Prime Minister but to the country. The policies remain unchanged, and the Government remain confidently in charge.

Mr. Tony Benn: Is the Leader of the House aware—he must be—that the Prime Minister is also First Lord of the Treasury, and that this afternoon she made a statement of confidence in her Chancellor knowing full well that it was his intention to resign? Therefore, she misled the House and her absence to explain that is another sign of her failure to take responsibility for actions that are hers and hers alone.

Sir Geoffrey Howe: As is clear from the statement that I have made, my right hon. Friend the Prime Minister, together with the rest of her colleagues in government, plainly regrets her inability to dissuade my right hon. Friend the Member for Blaby from resigning, but that resignation did not become effective until the conclusion of that discussion. There will be ample opportunities for discussion of these matters in the days, weeks and months ahead-opportunities that the Opposition have available to them in the ordinary way. I have no doubt that, throughout those opportunities, the country's confidence in the competence of my right hon. Friend the Prime Minister will reman undiminished and fortified.

Dr. David Owen: Since confidence in sterling tomorrow is the most crucial element, and since the Government have already stated that it is their policy to enter the exchange rate mechanism when the time is appropriate, will the Leader of the House convey to the new Chancellor, who carries all our best wishes for restoring confidence, that it would be wise to enter the exchange rate mechanism in the next few days and to announce it publicly?

Sir Geoffrey Howe: I am grateful to the right hon. Gentleman for his good wishes to my right hon. Friend the Chancellor of the Exchequer. The position of the

Government on the question that he has raised remains as stated by my right hon. Friend the Prime Minister at the conclusion of the Madrid summit.

Mr. Robert Sheldon: Is the Leader of the House aware that the right hon. Member for Blaby (Mr. Lawson) was in an impossible position? He had the responsibility for running the economy without the powers for so doing. Will the right hon. and learned Gentleman ensure that, if the Prime Minister is to remain long in her job, she does not subvert from next door the policies of the new Chancellor?

Sir Geoffrey Howe: There is no question of that. The circumstances surrounding this matter are as set out by my right hon. Friend the former Chancellor of the Exchequer in his letter of resignation. The matter will now proceed on the basis that not only he but also Professor Sir Alan Walters have resigned, and under the confident guidance of my right hon. Friend the Member for Huntingdon.

Mr. Alex Salmond: Is this a case of the Chancellor of the Exchequer losing his grip on the economy, or of the Prime Minister losing her grip on reality? Did the Prime Minister have no confidence in the Chancellor or did the Chancellor have no confidence in the Prime Minister? Either way, is it not time to test whether the country has confidence in the Government?

Sir Geoffrey Howe: This is the place in which to test the continuing confidence of the country in the Government, and we may have no doubts about the competence of my right hon. and hon. Friends in this Administration—[Interruption.]

Mr. Speaker: Order. Will those on the Liberal Democrat Bench please listen to what is going on?

Mr. Joseph Ashton: Surely it would have made much more common sense and benefited the economy if the ex-Chancellor could have been persuaded to resign on Saturday or Sunday. Was not resigning now an act of deep vindictiveness, which showed the depth of the split within the Cabinet and the shambles to which he has reduced the economy?

Sir Geoffrey Howe: That is a totally wrong-headed view of the situation. If my right hon. Friend the former Chancellor of the Exchequer had reached the conclusion that he had and sustained it after the discussion that took place, it would be wrong of him to do anything other than resign at the end of that conversation.

Mr. Gerald Bermingham: The Leader of the House said that this is the place to test the confidence of the country in the Government. Will he make time available in the next few days for a motion of confidence to be debated?

Sir Geoffrey Howe: The Opposition have their own time available for whatever motion they care to table.

Mr. Martin Flannery: Is it not clear to all of us—I am sure that Conservative Members agree, whether they say this or not—that the Government are economically and politically in a deep mess from which they do not know how to extricate themselves? At a time like this, surely we have the right to expect a Prime


Minister to have the courage to come here and speak to us herself instead of being such a coward about it and not coming.

Hon. Members: Oh!

Mr. Speaker: Order. That is a reflection on the honour of the Prime Minister. Will the hon. Gentleman please withdraw the word?

Mr. Flannery: I will change the word. To quote the Prime Minister, she is "frit". Therefore, is it not time for us to test the atmosphere by having a general election?

Sir Geoffrey Howe: There are ample opportunities, and there will he ample opportunities during the months and years ahead, for my right hon. Friend the Prime Minister to answer whatever questions are put. I have no doubt that she will do so with the continuing confidence of the House.

Mr. Stuart Bell: Will the deputy Prime Minister accept that there will be loud groans from one end of the country to another not because the Chancellor of the Exchequer has resigned but because the Deputy Prime Minister has said that the same policies will continue, with the same high interest rates, the same high balance of payments deficit and the same high unemployment? There will be no hope for the people of our country until the Government go.

Sir Geoffrey Howe: The Government's policies will continue. The real disaster for the people of this country would be if the Labour party were to come into office.

Mr. Heffer: The right hon. and learned Gentleman said that not only has the Chancellor of the Exchequer resigned, but so has Professor Walters. As I am one of those who believe that people should resign from Governments on the basis of principle, could he explain what the principle is? Is it that the right hon. Member for Blaby (Mr. Lawson) cannot stand the Prime Minister because of her interference in everything or is it because they now know that the economy is in such an unholy mess that the Government's policies have failed and the time has come for the rats to get off the ship before it sinks?

Sir Geoffrey Howe: The Chancellor of the Exchequer has resigned for the reasons plainly set out in his letter. Equally plainly, he has made it clear that he will continue his support for Government, as will all my right hon. and hon. Friends.

Mr. Nigel Spearing: The House has been reminded that the Prime Minister is the First Lord of the Treasury. What reasons did she give the deputy Prime Minister for not coming along to face her responsibilities this evening?

Sir Geoffrey Howe: There is no question of giving any reason for that. The House has business before it. I tabled a timetable motion, on which the House has just voted. There is business still to be done as a result of that motion, and I have fulfilled a commitment given to the House by my right hon. and learned Friend the former Chief Whip that I would make a statement as soon as possible. I have done so, and that is right.

Mr. Ron Leighton: rose——

Mr. Michael Colvin: On a point of order, Mr. Speaker. That question has already

been asked by three other hon. Members. This is becoming a ritual performance by Labour Members. Can we not get on with the business of the House?

Mr. Speaker: We have a heavy evening ahead of us. I propose to allow questions to run for no longer than 10 minutes more and then we must get on, because the first guillotine falls at 9.50.

Mr. Leighton: Is not the real issue the way that the absent Prime Minister runs her Government and her Cabinet, and the arrogant, authoritarian and dictatorial way that she behaves, which has lost her the right hon. Members for Henley (Mr. Heseltine) and for Blaby (Mr. Lawson)? If the deputy Prime Minister had any guts, considering the way in which he has been treated as a door mat, he would resign as well.

Sir Geoffrey Howe: The question now before us is whether we can get on with the business before the House.

Mr. David Winnick: Does the Leader of the House recognise how discourteous the Prime Minister has been in not coming here, in view of the disarray of her Government and the crisis with which we are now faced? Bearing in mind the fact that the real deputy Prime Minister is Mr. Bernard Ingham, and that Mr. Powell is also a senior adviser to her, is it not a fact that, like most dictators, the Prime Minister wants a court Cabinet and takes more notice of those people than she does of her real Cabinet?

Sir Geoffrey Howe: My right hon. Friend the Prime Minister conducts her Government in accordance with the normal constitutional proprieties, and has, during the time since my right hon. Friend the Chancellor of the Exchequer resigned some two and a quarter hours ago, appointed three senior, experienced and immensely worthwhile colleagues to new offices. The House may have confidence in them.

Mr. Bob Cryer: Does the Leader of the House accept that the nation is tired of the incompetence and arrogance of the Prime Minister, which have been demonstrated so forcibly by today's startling events? How will the squabble between the former Chancellor of the Exchequer and the Prime Minister, which has been made transparent today, help hard-pressed mortgage payers, who are now wondering every week how they will meet their repayments? How will it help us repay and recover from the biggest balance of trade deficit in the nation's history?

Sir Geoffrey Howe: Along the lines frequently stated by my right hon. Friend the Prime Minister and every other member of the Administration, on the basis that our policies are correctly designed to sustain the health and strength of the economy.

Mrs. Maria Fyfe: Considering that the former Chancellor of the Exchequer resigned because his job was incompatible with the Prime Minister having the ear of Sir Alan Walters or vice versa, and as Sir Alan has resigned as well, has it not been possible for the Prime Minister to invite the former Chancellor of the Exchequer back, and if not, why not?

Sir Geoffrey Howe: The sequence of events has unfolded as it has unfolded.

Mr. D. N. Campbell-Savours: Does the Leader of the House accept that tonight the Government should be preoccupied with the national interest to ensure stability in the foreign exchange markets tomorrow and to ensure again that the pound does not slide too far? Is that the Government's conviction tonight? Will every statement from Downing street be made with that objective in mind?

Sir Geoffrey Howe: The conviction of the Government will be to sustain the totality of the Government's economic policies, and one part of that is the continuation of the business of the House.

Mr. Peter Shore: The Leader of the House has referred to the totality of the Government's economic policies and their continuity. Surely it is for the right hon. and learned Gentleman to inform the House and the nation exactly what the policies are that are to be continued. Are they the policies advocated in respect of the European monetary system by the former Chancellor of the Exchequer and by the right hon. and learned Gentleman, or are they the policies that have been advocated by Sir Alan Walters and the Prime Minister?

Sir Geoffrey Howe: As I have already told the House, they are the policies that were enunciated following the Madrid summit of the European Council, as rehearsed by my right hon. Friend the Prime Minister and the former Chancellor of the Exchequer only a few days ago and as rehearsed by me. The policies remain as there stated and remain unchanged.

Mr. Merlyn Rees: But, following the point that the Leader of the House has just made, if it is as easy as that that the Government are following the policies laid down at Madrid, why did the former Chancellor of the Exchequer resign?

Sir Geoffrey Howe: For the reasons stated in my right hon. Friend's letter, which do not in any sense call in question the policies to which the Government remain committed.

Mr. Brian Sedgemore: With apologies to Shakespeare, does the Leader of the House really believe that the Prime Minister's wimpled, whingeing, purblind, wayward boy is fit to be the Chancellor of the Exchequer? When the pound sinks tomorrow, what does the boy intend to do, or has not the Prime Minister told him?

Sir Geoffrey Howe: The question deserves to be dismissed with contempt.

Mr. Rhodri Morgan: May I put it to the Leader of the House and deputy Prime Minister that his statement is seriously inadequate? The right hon. and learned Gentleman has told us who the new Foreign Secretary is, who the new Home Secretary is and who the new Chancellor of the Exchequer is. What he has not told us concerns the most important job of all: who will the Prime Minister appoint as her new economic adviser?

Sir Geoffrey Howe: That is not an office of continuity or an office under the Crown. It is an office that has often not existed. I dare say that that will be the position.

Dr. John Reid: First, may I congratulate the deputy Prime Minister on having for the time being avoided reappointment to the Foreign Office? I am sure that another clipping is the last thing that he needs at the moment. Will he agree with me that to lose one economic adviser is bad enough and careless, but to lose two in the same afternoon and 6,000 miles apart takes tremendous incompetence?
Will the Leader of the House confirm that the Prime Minister, as my right hon. Friend the Member for Chesterfield (Mr. Benn) asked earlier, did know of the intention of the Chancellor of the Exchequer to resign when she responded to the questions of my right hon. Friend the Leader of the Opposition? Secondly, given the sequence of events, can he confirm that, as Sir Alan Walters resigned out of "shock" on hearing of the resignation of the Chancellor of the Exchequer, and despite the Chancellor of the Exchequer's threat of resignation and its effect on the pound, Sir Alan was never asked for his advice, consulted or informed before the Chancellor of the Exchequer was allowed to go? Does that not show the utter contempt in which the Chancellor of the Exchequer was held by the Prime Minister?

Sir Geoffrey Howe: I can do without the hon. Gentleman's sympathy and advice in respect of my own position. I cannot add anything to what appears in the statement that I have made or to the letter of my right hon. Friend the former Chancellor of the Exchequer as published.

Mr. Tony Banks: May I congratulate the right hon. Member for Huntingdon (Mr. Major) on his new appointment? It seems that he has only to stand up to attract great offices of state. One trembles to think what he might be by this time next week. For how much longer are Ministers to accept the humiliations that are being heaped upon them by the Prime Minister? Is the Leader of the House not aware that a representative of Phillips and Drew said yesterday that the British economy was a banana economy? That was most apposite, given that we are led by a tinpot dictator.

Sir Geoffrey Howe: The hon. Gentleman's abuse does not add any strength to his case.

Mr. Dennis Skinner: Is the Leader of the House aware that it will not have gone unnoticed that only two Tory Members were prepared tonight to defend the changes that have been made? Does the House understand that there has been continuing internecine warfare between the Prime Minister and the Chancellor of the Exchequer over more than 12 months, and that it was characterised by the attendance of Cabinet Ministers to listen to the Chancellor of the Exchequer participate in an important economic debate yesterday? Only two of them were prepared to turn up to hear him.
There is no doubt that the Prime Minister has been wanting the Chancellor of the Exchequer's job and that at the same time the Chancellor of the Exchequer wanted to get out from under because of the economic mess that he and others had created. The net result is that we have managed to get rid of both the Chancellor of the Exchequer and Sir Alan Walters and have shifted several of the top jobs. I should like to know the housing arrangements for all those who are engaged in this reshuffle.

Sir Geoffrey Howe: The hon. Gentleman's rhetoric and fantasy has exhausted itself as usual. My right hon. and hon. Friends are remaining silent because the House wants to get ahead with the business that is before it.

Mr. A. J. Beith: The question that the Chancellor of the Exchequer and the Leader of the House cannot dismiss is this: what is now the Government's exchange rate policy? Is it the one favoured by the former Chancellor of the Exchequer of supporting the exchange rate by interest rates or the one favoured by the Prime Minister, who believes that one cannot buck the market?

Sir Geoffrey Howe: There is no dichotomy of that sort. I repeat to the hon. Gentleman that, in the course of the past 10 days in the House, my right hon. Friends the Prime Minister and the former Chancellor of the Exchequer and I have each reiterated our support for the same central Government economic policy, built upon the foundations set out in the statement after the Madrid European summit.

Mr. Dave Nellist: As the Prime Minister's support earlier this afternoon for the former Chancellor of the Exchequer was obviously about as welcome as the rope to the hanged man, is not the real issue the fact that, unlike the former Chancellor of the Exchequer and Professor Sir Alan Walters, millions of ordinary people in this city cannot walk away from the consequences of high interest rates and the coming recession? As my hon. Friend the Member for Liverpool, Walton (Mr. Heifer) said, only rats can leave a sinking ship.

Sir Geoffrey Howe: Millions of ordinary people can rest a great deal more confident with the continuity of this Government's economic policy than with the prospect of any sort of economic policy that commends itself to the hon. Gentleman.

Mr. George Galloway: Can we have an assurance that the right hon. Member for Huntingdon (Mr. Major) will bring to his individual office all the strength of character and independence of spirit that he displayed last week in Kuala Lumpur? Is not the major question this afternoon whether a poodle can stand tall enough to open the door of No. 11 Downing street?

Sir Geoffrey Howe: My right hon. Friend will bring to his office all those qualities that have so long commended him to my hon. Friends.

Orders of the Day — Companies Bill [Lords]

As amended ( in the Standing Committee), further considered.

Schedule 2

SCHEDULE 4A TO THE COMPANIES ACT 1985

FORM AND CONTENT OF GROUP ACCOUNTS

Amendments made: No. 15, in page 204, line 14, at end insert—

'11 A.—(1 ) Where a group is acquired, paragraphs 9 to 11 apply with the following adaptations.

(2) References to shares of the undertaking acquired shall be construed as references to shares of the parent undertaking of the group.

(3) Other references to the undertaking acquired shall be construed as references to the group; and references to the assets and liabilities, income and expenditure and capital and reserves of the undertaking acquired shall he construed as references to the assets and liabilities, income and expenditure and capital and reserves of the group after making the set-offs and other adjustments required by this Schedule in the case of group accounts.'.

No. 16, in page 206, line 44, leave out from 'matters' to end of line 27 on page 207 insert—

(4) The provisions of paragraphs 5 to 11 of Schedule 10A (rights to be taken into account and attribution of rights) apply in determining for the purposes of this paragraph whether an undertaking holds 20 per cent. or more of the voting rights in another undertaking.'.—[Mr. Redwood.]

Clause 6

ADDITIONAL DISCLOSURE REQUIRED IN NOTES TO ACCOUNTS

The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. John Redwood): I beg to move amendment No. 17, in page 11, line 37, at end insert—
'(3A) Where advantage is taken of subsection (3), that fact shall be stated in a note to the company's annual accounts.'
I am grateful that we can now proceed with the Companies Bill. I hope that we can make fairly rapid progress with the technical and fairly straightforward amendments before us, so that we may have real debates on some of the interesting amendments that arise later. As I try to steer my first Bill through Parliament, I cannot but wonder what I have done wrong because every night there seems to be some show arranged that takes hon. Members' minds off the Bill.
Clause 6 of the Bill includes a provision re-enacting existing exemptions from disclosure of the names of certain subsidiaries and related undertakings that date back to the Companies Act 1967 introduced by the then Labour Administration.
This amendment would require a company to disclose in its accounts the fact that it had taken advantage of those exemptions from disclosure. I bring it forward in response to a commitment given in Standing Committee in response to an amendment having the same purpose as this amendment moved by the hon. Member for Norwich, South (Mr. Garrett). We have considered this carefully in the light of our obligations under the fourth and seventh


company law directives and accept that an amendment is needed to give proper effect to article 45.1(b) of the fourth directive and article 35(1)(b) of the seventh directive.

Mr. Jim Cousins (Newcastle upon Tyne, Central): Will the notice of the exemption be reflected in the short statement of company accounts, which is also provided for in the Bill? It is important that all shareholders should be aware of the fact that the exemption is being taken advantage of, and it should therefore form part of the information that is provided in short company statements.

Mr. Redwood: I shall endeavour to ensure that it does so appear because I accept the hon. Gentleman's point.

Amendment agreed to.

Amendment made: No. 18, in page 13, line 2, at end insert `to this Act'.—[Mr. Redwood.]

Schedule 3

[SCHEDULE 5 TO THE COMPANIES ACT 1985]

DISCLOSURE OF INFORMATION: RELATED UNDERTAKINGS

PART I

COMPANIES NOT REQUIRED TO PREPARE GROUP ACCOUNTS

Amendments made: No. 20, in page 212, line 30, leave out 'in'.

No. 19, in page 212, line 44, leave out sub-paragraph (4) and insert
—
'(4) For the purposes of any of those provisions, shares held by way of security shall be treated as held by the person providing the security—
(a) where apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights attached to the shares are exercisable only in accordance with his instructions, and
(b) where the shares are held in connection with the granting of loans as part of normal business activities and apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights attached to the shares are exercisable only in his interests.'.

No. 21, in page 219, line 28, leave out sub-paragraph (4) and insert—
'(4) Shares held by way of security shall be treated as held by the person providing the security—
(a) where apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights attached to the shares are exercisable only in accordance with his instructions, and
(b) where the shares are held in connection with the granting of loans as part of normal business activities and apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights attached to the shares are exercisable only in his interests.'.—[Mr. Redwood.]

Schedule 4

DISCLOSURE OF INFORMATION: EMOLUMENTS AND OTHER BENEFITS OF DIRECTORS AND OTHERS

Mr. Redwood: I beg to move amendment No. 22, in page 221, line 34, at end insert—
'(4) References to pensions include benefits otherwise than in cash and in relation to so much of a pension as consists of such a benefit references to its amount are to the estimated money value of the benefit.
The nature of any such benefit shall also be disclosed.'.
My hon. Friend the Member for Richmond and Barnes (Mr. Hanley) moved an amendment in Standing Committee with exactly the same purpose as this amendment. He graciously withdrew it when my hon. Friend the Under-Secretary of State for Consumer Affairs promised to bring forward a Government amendment on Report with the same purpose. The effect is to extend slightly what is meant by directors' pensions for the purposes of the disclosure requirements in schedule 4 of the Bill, so that it includes benefits paid in kind and not just cash benefits.

Mr. Jeremy Hanley: I am grateful to my hon. Friend for introducing the amendments. I wish to take this brief opportunity to ask him to explain how he intends to take into account amendments, other than Government amendments, under the guillotine this evening.

Mr. Redwood: I want to make rapid progress so that we can consider as many amendments as possible in our debates. I understand that there is a power for the Government to move other amendments if they so choose, when the guillotine falls.

Amendment agreed to.

Clause 9

AUDITORS' REPORT

Mr. Redwood: I beg to move amendment No. 23, in page 17, line 1, leave out from beginning to end of line 38.

Mr. Deputy Speaker (Sir Paul Dean): With this we shall discuss Government amendments Nos. 27 to 29, 68, and 111 to 119.

Mr. Redwood: This series of amendments completes the process started in Committee of bringing the provisions on auditors together in part 5 of chapter XI of the 1985 Act.

Amendment agreed to.

Clause 10

PUBLICATION OF ACCOUNTS AND REPORTS

Amendment made: No. 24, in page 18, line 26, at end insert—
'(6) Where copies are sent out under this section over a period of days, references elsewhere in this Act to the day on which copies are sent out shall be construed as references to the last day of that period.'.—[Mr. Redwood.]

Clause 11

LAYING AND DELIVERING OF ACCOUNTS AND REPORTS

Amendments made: No. 25, in page 20, line 43, leave out from begining to end of line 10 on page 21.

No. 26, in page 21. line 28, at end insert—

'Civil penalty for failure to deliver accounts.
242A.—(1) Where the requirements of section 242(1) are not complied with before the end of the period allowed for laying and delivering accounts and reports, the company is liable to a civil penalty.

This is in addition to any liability of the directors under section 242.

(a) The amount of the penalty is determined by reference to the length of the period between the end of the period allowed for laying and delivering accounts and reports and the day on which the requirements are complied with, and whether the company is a public or private company, as follows:


Length of period
Public company
Private company


Not more than 3 months.
£500
£100


More than 3 months but not more than 6 months.
£1,000
£250


More than 6 months but not more than 12 months.
£2,000
£500


More than 12 months.
£5,000
£1,000

(3) The penalty may be recovered by the registrar and shall be paid by him into the Consolidated Fund.

(4) It is not a defence in proceedings under this section to prove that the documents in question were not in fact prepared as required by this Part.'.—[Mr. Redwood.']

Clause 12

REMEDIES FOR FAILURE TO COMPLY WITH ACCOUNTING REQUIREMENTS

Mr. Hanky: I beg to move amendment No. 3, in page 25, leave out lines 8 and 9.

Mr. Deputy Speaker: With this we shall discuss the following amendments: No. 285, in page 25, line 39, at end insert—

`( ) Where the court makes an order under subsection (4) it shall have regard to whether the directors party to the approval of the defective accounts knew or ought to have known that the accounts did not comply with the requirements of this Act, and it may exclude one or more directors from the order or order the payment of different amounts by different directors.'.

No. 6, in page 26, line 1. leave out section 245C.

Mr. Hanley: Clause 12 introduces procedures for the revision of defective accounts. This largely replaces the present criminal offence of non-compliance with the accounting requirements of the Act. It also implements one of the recommendations of the Dearing report.
New sections 245B and 245C enable the Secretary of State, or any person to whom the Secretary of State delegates his powers, to apply to the court for an order requiring the directors of a company to prepare revised accounts. It is envisaged that this power would in practice be delegated to the review panel, a body to be set up to implement another recommendation of the Dearing report. It might also be delegated to other bodies, such as the stock exchange.
In the view of the combined consultative accounting bodies, however, if responsibility for action is divided among more than one body, there will inevitably be buck passing and inaction. For enforcement to be effective, it has to be the responsibility of only one person or body. This must be the Secretary of State. We discussed this matter at reasonable length both on Second Reading and

in Committee. Amendments Nos. 3 and 6 would ensure that the Secretary of State takes full responsibility by removing the possibility of any delegation of his powers.
New section 245B(4) enables the court to require directors who approve defective accounts to meet the cost of preparing revised accounts. Whether accounts are defective may well be a matter of opinion. Directors could find that they prepare the accounts in good faith, but that the court takes a different view from them of how the accounts should have been prepared. The costs that they would have to meet in such a case might be substantial. This would be unjust if the directors have indeed been acting in good faith.
Amendment No. 285 provides a remedy for this injustice by requiring the court, whenever it makes an order against directors to pay costs, to have regard to whether the directors involved knew or ought to have known that the accounts did not comply with the requirements of the Act. In this way, innocent non-compliance will not be punished unduly.
Amendments Nos. 3 and 6 should be dealt with together, with amendment No. 285 being dealt with separately. I should be grateful to my hon. Friend if he would respond to my points.

Mr. John Garrett: As the hon. Member for Richmond and Barnes (Mr. Hanley) explained, these amendments seek to restrict power to the Secretary of State to take a company to court to have its accounts revised if they are defective. We discussed this matter in Committee and the Opposition supported that general concept.
The Bill implements the Dearing proposals and introduces a new statutory power under civil law for certain authorised bodies or the Secretary of State to apply to the courts for an order requiring revision of accounts that do not appear to show a true and fair view.
The Dearing report suggested that the authorised bodies should be the review panel of the proposed Financial Reporting Council and the stock exchange. However, we believe that the possible exercise of such a power should be restricted to the Secretary of State. In Committee we adduced two main arguments in favour of that. First, if more than one body is responsible for applying to the courts to seek the revision of accounts there could be an argument about who is ultimately responsible for bringing such a case. The hon. Gentleman referred to that as buck passing. We think that such an arrangement makes for confusion about whose responsibility it properly is to bring such a case and it would lead to uncertainty as to which of the various bodies have the power, authority and will to require the revision of a defective set of accounts.
As was also pointed out in Committee, bringing a case against a company for the revision of its defective accounts could prove to be very expensive, especially if the director's of the company took the case to the House of Lords—which is what happened in the Lonrho case. The review panel's finances are likely to be limited. The stock exchange might also feel that its funds were limited in the light of its cool response to the Dearing proposals. Therefore, it is more appropriate for the Secretary of State and the Department to take upon themselves the responsibility for bringing such matters to proper redress. The chance of defective accounts would be lessened if it was known by the directors, who might otherwise let


defective accounts be published, that the Secretary of State had this power and was known to be willing to use it. In general, the hon. Member for Richmond and Barnes has the right approach to the matter.

Mr. Redwood: I am grateful to my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) and to the hon. Member for Norwich, South (Mr. Garrett) for the way in which they have put forward their ideas. I recommend that we accept amendment No. 285. There is a problem which that amendment tackles well.
On amendments Nos. 3 and 6 I have more difficulties. I understand the arguments that have been put forward by hon. Members on both sides of the House but I am afraid that I am not persuaded by them. I am unconvinced that giving more power to more than one person will prove a recipe for buck passing and inaction. It is likely in practice that the Financial Reporting Council and the proposed review panel under it will be concerned only with large companies. In other cases, where the public interest dictates, it will be for the Secretary of State to take action.
The point has been made that the cost of bringing such actions will prove too great for the FRC review panel. I recognise that the financing arrangements for the new arrangements for accounting standards will need to provide adequate resources for that purpose. That will emerge in due course as Sir Ronald Dearing carries out his work.
Let me conclude by saying why the Bill is correct in its present form on those points.
For large companies the likelihood is that the review panel will be in the lead in enforcing accounting standards. A power to apply to the courts strengthens the panel's position and adds weight to its powers of persuasion.
In a wide sense we do not seek legislation to require everything to be funnelled through the Secretary of State. That would be unwelcome in the overall balance of the Dearing proposals.
Above all, it must be right at this stage, when the new institutional arrangements are not yet in place, to keep the options open. The provision in the Bill is permissive; it does not require other bodies to be authorised for this purpose.
Therefore, I ask the House to reject amendments Nos. 3 and 6.

Mr. Hanley: I am grateful to my hon. Friend the Minister for accepting amendment No. 285. In the light of his statement, I shall withdraw amendments Nos. 3 and 6. That is a vote of confidence in Sir Ronald Dearing's appointment yesterday. It would be right to allow Sir Ronald to tackle the job. A person is now in place to look at the issue. Therefore, I ask my hon. Friend to consider carefully the funding arrangements of the exercise as they are crucial to the success of the accounting standards programme.
During the recess we heard that the CBI disagreed with the funding arrangements. The accounting profession feels that they are not the right way forward. It has already been said in Committee that a levy on all companies might be a more sensible and equitable way forward. Therefore, I hope that my hon. Friend will discuss with Sir Ronald the funding arrangements in due course. In the meantime, I beg to ask leave to withdraw amendment No. 3.

Amendment, by leave withdrawn.

Amendment made: No. 285, in page 25, line 39, at end insert—
'( ) Where the court makes an order under subsection (4) it shall have regard to whether the directors party to the approval of the defective accounts knew or ought to have known that the accounts did not comply with the requirements of this Act, and it may exclude one or more directors from the order or order the payment of different amounts by different directors.'.

Clause 14

DORMANT COMPANIES

Amendments made: No. 27, in page 30, line 39, leave out 'sections are' and insert 'section is'.

No. 28 in page 30, line 43, leave out from 'the' to 'in' in line 44 and insert

'provisions of this Part relating to the audit of accounts'.

No. 29, in page 31, line 28, leave out from beginning to end of line 11 on page 32 and insert—
'(4) Where a company is, at the end of a financial year, exempt by virtue of this section from the provisions of this Part relating to the audit of accounts—
(a) sections 238 and 239 (right to receive or demand copies of accounts and reports) have effect with the omission of references to the auditors' report;
(b) no copies of an auditors' report need be laid before the company in general meeting;
(c) no copy of an auditors' report need be delivered to the registrar, and if none is delivered, the copy of the balance sheet so delivered shall contain a statement by the directors, in a position immediately above the signature required by section 233(4), that the company was dormant throughout the financial year; and
(d) the company shall be treated as entitled in respect of its individual accounts for that year to the exemptions conferred by section 246 on a small company, notwithstanding that it is a member of an ineligible group.

(5) Where a company which is exempt by virtue of this section from the provisions of this Part relating to the audit of accounts—
(a) ceases to be dormant, or
(b) would no longer qualify (for any other reason) to make itself exempt by passing a resolution under this section,

it shall thereupon cease to be so exempt.".'.—[Mr. Redwood.]

Schedule 7

SPECIAL PROVISIONS FOR BANKING AND INSURANCE COMPANIES AND GROUPS

Amendments made: No. 30, in page 228, line 35, leave out from beginning to '(information' and insert—

'1. In paragraph 10(1)(c) of Schedule 9 to the Companies Act 1985 (disclosure of outstanding loans in connection with certain cases of financial assistance for purchase of company's own shares), after "153(4)(6)" insert ", (bb)".

1A. In paragraph 13 of that Schedule".

No. 31, in page 229, line 11, leave out from 'particulars' to end of line 12 and insert

'of any material departure from those standards and the reasons for it shall be given.'.

No. 32, in page 230, line 13, leave out from 'for' to end of line 14 and insert

'the words from "paragraphs 15" to the end substitute "and paragraph 15".'. [Mr. Redwood.]

Clause 20

POWER TO ALTER ACCOUNTING REQUIREMENTS

Amendments made: No. 33, in page 39, line 34, leave out 'and' and insert—
'(bb) make consequential amendments or repeals in other
provisions of this Act, or in other enactments, and'

No. 34, in page 39, line 35, after 'such' insert 'transitional and other'—[Mr. Redwood.]

Clause 21

PARENT AND SUBSIDIARY UNDERTAKINGS

Amendment made: No. 35, in page 40, line 5, leave out `Act' and insert 'Part'—[Mr. Redwood.]

Clause 22

OTHER INTERPRETATION PROVISIONS

Amendments made: No. 36, in page 43, line 5, leave out `Act' and insert 'Part'

No. 37 in page 44, line 20, leave out 'Act' and insert 'Part'

No. 38, in page 45, leave out line 5 and insert—


'annual accounts
section 262(1)


(generally)
section 261(2)'.


(includes notes to the accounts)

No. 39, in page 45, line 8, at end insert—


'balance sheet (includes notes)
section 261(2)'

No. 40, in page 45, line 43, column 2, leave out '261' and insert `261(1)'.

No. 41, in page 45, leave out lines 51 and 52 and insert—


'profit and loss account (includes notes)
section 261(2)


(in relation to company not trading for profit)
section 262(2)'—[Mr. Redwood.]

Schedule 10

AMENDMENTS CONSEQUENTIAL ON PART I

Amendments made: No. 42, in page 237, line 12, leave out from beginning to end of line 13

No. 43, in page 237, line 36, after `343(2)' insert 'and (4)'

No. 44, in page 237, line 38, leave out paragraph 12.

No. 45, in page 238, line 28, leave out from beginning to end of line 30 and insert—
'702—(1) An oversea company shall in respect of each financial year of the company deliver to the registrar copies of the accounts and reports prepared in accordance with section 700.
If any document comprised in those accounts or reports is in a language other than English, the directors shall annex to the copy delivered a translation of it into English, certified in the prescribed manner to be a correct translation.'

No. 46, in page 238, line 32, leave out 'the delivering of' and insert 'delivering'

No. 47, in page 238, line 39, leave out from 'Britain' to end of line 42

No. 48, in page 238, line 45, leave out `for delivering accounts'

No. 49, in page 239, line 9, leave out from beginning to end of line 11 and insert—
'703.—(1) If the requirements of section 702(1) are not complied with before the end of the period allowed for

delivering accounts and reports, or if the accounts and reports delivered do not comply with the requirements of this Act, the company and every person who immediately before the end of that period was a director of the company is guilty of an offence and liable to a fine and, for continued contravention, to a daily default fine.
(2)It is a defence for a person charged with such an offence to prove that he took all reasonable steps for securing that the requirements in question would be complied with.
It is not a defence in relation to a failure to deliver copies to the registrar to prove that the documents in question were not in fact prepared as required by this Act.'

No. 50, in page 239, line 22, at beginning insert "'balance sheet" and'.

No. 51, in page 239, line 25, leave out 'and' and insert—'parent company" and "parent undertaking",

No. 52, in page 239, line 26, leave out from 'account"; to end of line 27

No. 53, in page 239, line 27, at end insert ', and "subsidiary undertaking".'

No. 54, in page 239, line 44, leave out from '(1)' to 'and' in line 46 and insert
omit "paragraph 60(2) of Schedule 4, or paragraph 19(3) of Schedule 9";'

No. 55, in page 240, line 2, leave out '(2)' and insert `(1)'

No. 56, in page 240, line 5, leave sub-paragraph (5) and insert—
'(5) In paragraph 4—

(a) in sub-paragraph (1) omit "(whether as personal representative or otherwise)", and
(b) in sub-paragraph (2) omit ", paragraph 60(2) of Schedule 4 and paragraph 19(3) of Schedule 9"; and at the end add—
(3) as respects sections 145, 146 and 148, sub-paragraph (1) above applies where a company is a personal representative as it applies where a company is a trustee.'".'

No. 57, in page 241, line 15, leave out
'(whether as personal representative or otherwise)'.

No. 58, in page 241, line 25, leave out sub-paragraph (2) and insert—
'(2) "Undertaking" and "shares", in relation to an undertaking, have the same meaning as in Part VII.'

No. 59, in page 241, line 37, at end insert—
'19A.—(1) Part II of Schedule 3 (prospectuses: auditors' and accountants' reports to be set out) is amended as follows:
(2) In paragraph 16 (auditors' reports), in sub—paragraph (2) for "subsidiaries" substitute "subsidiary undertakings" and for sub-paragraph (3) substitute—
(3) If the company has subsidiary undertakings, the report shall—
(a) deal separately with the company's profits or losses as provided by sub-paragraph (2), and in addition deal either—

(i) as a whole with the combined profits or losses of its subsidiary undertakings, so far as they concern members of the company, or
(ii) individually with the profits or losses of each of its subsidiary undertakings, so far as they concern members of the company,
or, instead of dealing separately with the company's profits or losses, deal as a whole with the profits or losses of the company and (so far as they concern members of the company) with the combined profits and losses of its subsidiary undertakings; and
(b) deal separately with the company's assets and liabilities as provided by sub-paragraph (2), and in addition deal either—
(i) as a whole with the combined assets arid liabilities of its subsidiary undertakings, with or without the company's assets and liabilities, or


(ii) individually with the assets and liabilities of each of its subsidiary undertakings, indicating, as respects the assets and liabilities of its subsidiary undertakings, the allowance to be made for persons other than members of the company.".

(3) For paragraph 18 (accountants' reports) substitute—"18.—(1) The following provisions apply if—
(a) the proceeds of the issue are to be applied directly or indirectly in any manner resulting in the acquisition by the company of shares in any other undertaking, or any part of the proceeds is to be so applied, and
(b) by reason of that acquisition or anything to be done in consequence of or in connection with it, that undertaking will become a subsidiary undertaking of the company.

(2) There shall be set out in the prospectus a report made by accountants upon—
(a) the profits or losses of the other undertaking in respect of each of the five financial years immediately preceding the issue of the prospectus, and
(b) the assets and liabilities of the other undertaking at the last date to which its accounts were made up.

(3) The report shall—
(a) indicate how the profits or losses of the other undertaking would in respect of the shares to be acquired have concerned members of the company and what allowance would have fallen to be made, in relation to assets and liabilities so dealt with, for holders of other shares, if the company had at all material times held the shares to be acquired, and
(b) where the other undertaking is a parent undertaking, deal with the profits or losses and the assets and liabilities of the undertaking and its subsidiary undertakings in the manner provided by paragraph 16(3) above in relation to the company and its subsidiary undertakings.

(4) In this paragraph "undertaking" and "shares", in relation to an undertaking, have the same meaning as in Part VII.".

(4) In paragraph 22 (eligibility of accountants to make reports), for sub-paragraph (2) substitute—
(2) Such a report shall not be made by an accountant who is an officer or servant, or a partner of or in the employment of an officer or servant, of—
(a) the company or any of its subsidiary undertakings,
(b) a parent undertaking of the company or any subsidiary undertaking of such an undertaking.".'.

No. 60, in page 242, line 12, leave out paragraph 22 and insert—
'22.—(1) In Schedule 15A (renumbered 15B) (provisions applicable to mergers and divisions of public companies), paragraph 6 (documents to be made available for inspection) is amended as follows.

(2) In sub-paragraph (1)(b) (directors' report on merger or division), after "directors' report" insert "referred to in paragraph 4 above".

(3) For sub paragraph (1)(d) and (e) substitute—
"(d) the company's annual accounts, together with the relevant directors' report and auditors' report, for the last three financial years ending on or before the relevant date; and
(e) if the last of those financial years ended more than six months before the relevant date, an accounting statement in the form described in the following provisions."

(4) In sub-paragraph (1), after the paragraphs add—
In this paragraphs (d) and (e) "the relevant date" means one month before the first meeting of the company summoned under section 425(1) or for the purposes of paragraph 1.".

(5) For sub-paragraphs (2) to (5) substitute—
(2) The accounting statement shall consist of—

(a) a balance sheet dealing with the state of the affairs of the company as at a date not more than three months before the draft terms were adopted by the directors, and
(b) where the company would be required to prepare group accounts if that date were the last day of a financial year, a consolidated balance sheet dealing with the state of affairs of the company and its subsidiary undertakings as at that date.

(3) The requirements of this Act as to balance sheets forming part of a company's annual accounts, and the matters to be included in notes thereto, apply to any balance sheet required for the accounting statement, with such modifications as are necessary by reason of its being prepared otherwise than as at the last day of a financial year.

(4) Any balance sheet required for the accounting statement shall be approved by the board of directors and signed on behalf of the board by a director of the company.

(5) In relation to a company within the meaning of Article 3 of the Companies (Northern Ireland) Order 1986, the references in this paragraph to the requirements of this Act shall be construed as reference to the corresponding requirements of that Order.".'.

No. 61, in page 242, line 40, at end insert—
'22A. In Schedule 22 (provisions applying to unregistered companies), in the entry relating to Part VII, in column 1, for "Schedule 10" substitute "Schedules 10 and 10A".'.

No. 62, in page 243, line 39, at end insert—
'(4) In the entry for section 703(1) (failure by oversea company to comply with requirements as to accounts and reports), in column 2 for the words from "s.700" to the end substitute "requirements as to accounts and reports".'.

No. 63, in page 244, line 22, at end insert—

'Aircraft and Shipbuilding Industries Act 1977 (c.3)

26A.—(1) Section 17 of the Aircraft and Shipbuilding Industries Act 1977 (British Shipbuilders: accounts and audit) is amended as follows.

(2) In subsection (1)(c) (duty to prepare consolidated accounts) for "subsidiaries" substitute "subsidiary undertakings".

(3) In subsection (9) (copies of accounts to be sent to the Secretary of State) for "subsidiaries" substitute "subsidiary undertakings" and for "subsidiary" substitute "subsidiary undertaking".

(4) After subsection (9) add—
(10) In this section "subsidiary undertaking" has the same meaning as in Part VII of the Companies Act 1985.".

Crown Agents Act 1979 (c.43)

26B. In section 22 of the Crown Agents Act 1979 (accounts and audit), in subsection (2) (duty to prepare consolidated accounts) for "subsidiaries" (three times) substitute "subsidiary undertakings", and at the end of that subsection add—
In this subsection "subsidiary undertaking" has the same meaning as in Part VII of the Companies Act 1985.".'.

No. 64, in page 244, line 25, leave out '(3)(c)(i)' and insert '(1)(c)(i)'.

No. 65, in page 244, line 33, at end insert—

'Oil and Pipelines Act 1985 (c. 62)

29A. In Schedule 3 to the Oil and Pipelines Act 1985 (Oil and Pipelines Agency: financial and other provisions), in paragraph 9(2) (duty to prepare consolidated accounts) for "subsidiaries" (three times) substitute "subsidiary undertakings", and at the end of that sub-paragraph add—
In this sub-paragraph 'subsidiary undertaking' has the same meaning as in Part VII of the Companies Act 1985.".

Patents, Designs and Marks Act 1986 (c. 39)

29B. In Schedule 2 to the Patents. Designs and Marks Act 1986 (service marks), in paragraph 1(2) (provisions in which reference to trade mark includes service mark) for sub-paragraph (ii) substitute—
(ii) Part I of Schedule 4 and paragraphs 5(2)(d) and 10(1)(b) and (2) of Schedule 9 (form of company balance sheets); and".'.

No. 66, in page 245, line 25, at end insert—
'(1A) In section 46(2) (duties of auditors of authorised institution), in paragraph (c) for "section 236" substitute "section 235(2)" and for "section 237" substitute "section 235(3) or section 237"; and in section 46(4) (adaptation of references for Northern Ireland) for "236 and 237" substitute "235(2) and 235(3) and 237".'.

No. 67, in page 245, line 48, at end insert—

Income and Corporation Taxes Act 1987 (c.1)

33.—(1) The Income and Corporation Taxes Act 1988 is amended as follows.

(2) In section 180 (annual return of registered profit related pay scheme), in subsection (3) for "section 242(3)" substitute "section 244(3)".

(3) In section 565(6) (conditions for exemption from provisions relating to sub-contractors in construction industry: compliance with requirements of Companies Act 1985), in paragraph (a) for "section 277 and 241" substitute
sections 266, 241 and 242".'.

Dartford-Thurrock Crossing Act 1988 (c.20)

34. In section 33 of the Dartford-Thurrock Crossing Act 1988 (duty to lay before Parliament copies of accounts of persons appointed to levy tolls), for subsection (2) substitute—
(2) In relation to a company "accounts" in subsection (1) means the company's annual accounts for a financial year, together with the relevant directors' report and the auditors' report on those accounts.
Expressions used in this subsection have the same meaning as in Part VII of the Companies Act 1985.".'.—[Mr. Redwood.]

New Clause A

POWER TO MAKE CONSEQUENTIAL AMENDMENTS

'.—(1) The Secretary of State may by regulations make such amendments of enactments as appear to him to be necessary or expedient in consequence of the provisions of Part II of this Act having effect in place of section 389 of the Companies Act 1985.

(2) That power extends to making such amendments as appear to the Secretary of State necessary or expedient of—
(a) enactments referring by name to the bodies of accountants recognised for the purposes of section 389(1)(a) of the Companies Act 1985, and
(b) enactments making with respect to other statutory auditors provision as to the matters dealt with in relation to company auditors by section 389 of the Companies Act 1985.

(3) The provision which may be made with respect to other statutory auditors includes provision as to—
(a) eligibility for the appointment,
(b) the effect of appointing a partnership which is not a legal person and the manner of exercise of the auditor's rights in such a case, and
(c) ineligibility on the ground of lack of independence or any other ground.

(4) The regulations may contain such supplementary, incidental and transitional provision as appears to the Secretary of State to be necessary or expedient.

(5) The Secretary of State shall not make regulations under this section with respect to any statutory auditors without the consent of—
(a) the Minister responsible for their appointment or responsible for the body or person by, or in relation to whom, they are appointed, or
(b) if there is no such Minister, the person by whom they are appointed.

(6) In this section a "statutory auditor" means a person appointed auditor in pursuance of any enactment authorising or requiring the appointment of an auditor or auditors.

(7) Regulations under this section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.'.—[Mr. Forth]

Brought up, and read the First time.

The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Eric Forth): I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to take Government new clause 18—Power to make provision in consequence of changes affecting accountancy bodies—and Government amendments Nos. 74 to 77.

Mr. Forth: This group of amendments concerns the consequential amendments which will have to be made to other enactments when section 389 of the Companies Act has been repealed and replaced by the provisions in part II of the Bill. Some of the amendments which need to be made are presently set down in schedule 15 to the Bill, but there is a considerable number of others. The amendments replace that schedule with a power to make all the necessary consequential amendments by regulations.
There are a number of reasons for this change in approach. As hon. Members will know, part II of the Bill will for the first time permit bodies corporate or partnerships which do not have separate legal personality to be appointed as company auditors. However, a number of the other enactments which make provision for the appointment of auditors proceed on the assumption that only individuals or partnerships with separate legal personality will be appointed. This reflects the present position under the Companies Act. In some cases, catering for the possibility that the auditors may be a body corporate or a partnership of this type will involve lengthy, if wholly technical, adjustment to the present provisions. We think this task will be better done at more leisure in the form of regulations which we will lay before the House in due course.
8.45 pm
Another reason is that we are not in a position to say definitively which other enactments need amendment. References in public Acts to section 389 and to the accountancy bodies specified in that section may of course be picked up by a computer search. But we know that there are some references in local and private Acts. Since these Acts have not been placed on a database, we cannot be sure of picking all of them up at this stage. The ability to make regulations will enable us to make the necessary provision for any references which only later come to light.
The third reason I would commend this approach to consequential amendments is that it will allow for some flexibility in later years in specifying which accountants a re to be eligible to carry out the auditing functions in other enactments. The effect of part II will be that the number of persons eligible in law to audit companies will fall. It may well also be that company auditing will become an even more specialised branch of the accountancy tree than it is at present. If that happens, one might wish not to follow the standard provision and restrict some of the functions to company auditors alone. One might wish to add certain other qualified accountants. This amendment will allow for that possibility.
I ought to mention one other amendment in this group, new clause 18. If a recognised supervisory body or one of the bodies presently recognised under section 389 were to change its name or merge with another body or otherwise be affected by a transfer of engagements, the Secretary of State would have discretion to recognise the new body. But he would not always be able to use the regulation-making power in new clause 17 to deal with the position under


other enactments since that may only be used where a consequential amendment is necessary or the provision is concerned with auditing, and not with some of the other functions with which other enactments are concerned. New clause 18 therefore enables the Secretary of State to make by regulations such amendments of enactments as appear to him to be necessary or expedient in consequence of a change of name, merger or transfer of engagement affecting accountancy bodies recognised under enactments. I should mention that this new clause is supported by the Institute of Chartered Accountants, which had expressed concern about the legal position should one of them merge with another body.

Mr. John Garrett: Will the Minister confirm that new clauses 17 and 18 are items of secondary legislation which can be enacted by negative resolution? Is that not yet another example of a number of cases of secondary legislation in the Bill which is subject to the negative rather than to the positive form of resolution? Will he tell us why?

Mr. Forth: The hon. Gentleman may well be teasing me and the House slightly. I suggest that he knows the answer to the question, but I shall give it to him again. The ground was covered in Committee, but there is no reason why it should not be covered again on Report.
In this area we are dealing with complex matters which are not yet fully resolved and may not even be fully seen yet. Therefore, the only practical way forward is to give the Secretary of State the sort of delegated powers in the new clauses and amendments and they would be dealt with by negative resolution.
That is a familiar way to deal with such matters. It would be impractical for the House to attempt to deal with such a measure by positive resolution in the kind of detail and complexity which may well arise. Business managers and Opposition Members are familiar with the negative resolution procedure, which is a satisfactory, effective and practical way of dealing with matters of such complexity. I hope that the hon. Gentleman will accept and understand that explanation. I think that he well understands the complexity of these matters and the importance of dealing with them in a practical and realistic way. It is for those reasons that the new clauses have been drafted in the way that they have.

Mr. Cousins: The procedural point has been clarified, but we are still left with the substantive issues.
As the Minister has said, we are faced with considerable and rapid changes in the structure of the accountancy world. As the hon. Gentleman admitted in his short elucidatory statement, those changes make some difficulties for us, raising substantially new and different issues. He has not enlightened us about how he proposes to deal with the matters of substance contained in the new clause.
We are faced with the possibility of the issuing of regulations at a later date to deal with significant matters: the eligibility for appointment as auditors, the effect of appointing partnerships that are not legal persons and, in particular, ineligibility because of a lack of independence. I need not detain the House unduly by referring to recent events which give those matters considerable moment and significance. The Minister, however, has moved the new

clause very late in the proceedings, when we are all at a disadvantage—and he will recognise that we are at an additional disadvantage owing to the timetable motion.
I apologise to the House for raising the matter, but it has to be raised. I feel that the Minister owes it to the House to give some indication of the substantive nature of the regulations that he proposes with regard to the three issues that I have raised, particularly that of ineligibility on the ground of lack of independence.
The matter is of considerable public interest, at a time when we are seeing the accountancy world shrink into a small number of large partnerships—which, moreover, may change their status. It is important to the markets and to everyone concerned with such issues, and the Minister should elucidate a little more.

Mr. Hanley: I welcome the new clause. Throughout the summer—and, indeed, in Committee—the Government have been talking to the requisite authorities, including the Institute of Chartered Accountants in England and Wales. The new clause is the result. I assure the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) that there is nothing sinister about it or its fellows; if anything, they enable the Government to deal with problems that might arise in the accountancy world very much more quickly and effectively. They would, in fact, deal better than any existing legislation with exactly the matters that the hon. Gentleman has raised.
The initial reason for discussion was the proposed merger between the Institute of Chartered Accountants in England and Wales and the ICA in Scotland. In the end that merger did not occur, regrettably in my view. Rationalisations will, however, take place in the accountancy world. These proposals will enable the law and the requisite protection of the consumer to continue without the need for any legislation. They will enable the existing protections of the Department of Trade and Industry to move quickly from one body to another, new body, and I believe that accountancy welcomes them. Certainly they are not easier than the regulations that have obtained in the past, but they will speed up, as well as tighten, the process of consumer protection.

Mr. Forth: I understand why the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) wanted to pursue this point; however, I think that he provided the explanation in the terms in which he put his question. He conceded what we all know, and then gave examples. As he said, considerable changes are taking place in the accountancy world, and that is precisely why we have cast the new clauses and amendments as we have.
Surely the hon. Gentleman must also concede that, given that background of change and development, to attempt to set any of our proposals in concrete would be counter-productive, and might even go against the objectives that he himself has set out. I suggest that the new clause is the best way to deal effectively with the profession in the face of such a rate of change.
I am grateful to my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) for adding his expert and knowledgeable comments. Following our dealings in Committee, I think we all agree that few know as much as he does about the profession, and his words of support are very welcome.
My hon. Friend mentioned that we had been careful to consult the profession. We have tried, I think successfully, to bring to the House a form of words that will provide the right framework for a modern and effective profession.

Mr. Cousins: rose——

Mr. Deputy Speaker: Order. The hon. Gentleman has already spoken. I do not think that the Minister is giving way.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 18

POWER TO MAKE PROVISION IN CONSEQUENCE OF CHANGES AFFECTING ACCOUNTANCY BODIES

'.—(1) The Secretary of State may by regulations make such amendments of enactments as appear to him to be necessary or expedient in consequence of any change of name, merger or transfer of engagements affecting—
(a) a recognised supervisory or qualifying body under Part II of this Act, or
(b) a body of accountants referred to in, or approved, authorised or otherwise recognised for the purposes of, any other enactment.

(2) Regulations under this section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.'.—[Mr. Forth.]

Brought up, read the First and Second time, and added to the Bill.

Clause 24

INTRODUCTION

Amendment made: No. 68, in page 46, line 29, leave out from beginning to first 'and' in line 30 and insert
'Chapter V of Part XI of the Companies Act 1985;'.—[Mr. Forth.]

Schedule 11

RECOGNITION OF SUPERVISORY BODY

Mr. Forth: I beg to move amendment No. 69, in page 248, line 19, leave out 'not unqualified' and insert
`qualified persons or, if the body consists of two persons only, that at least one of them is a qualified person'.
The amendment takes advantage of an option in the eighth directive to the effect that, in the case of a firm that has a management body of two, member states need not require that a majority of that body be qualified. Obviously, in the case of a two-member body, a majority would mean both members, and it seems right to allow in the primary legislation for the possibility of one of them being unqualified.
Hon. Members who sat on the Committee may recall that an amendment with that intention was made to the Bill then. On consideration, however, we decided that it did not accurately reflect the requirements of the directive. We believe that this amendment will give proper effect to the relevant part of the directive.

Amendment agreed to.

Mr. Forth: I beg to move amendment No. 70, in page 250, line 21, at end insert—

`Taking account of costs of compliance

14A. The body must have satisfactory arrangements for

taking account, in framing its rules, of the cost to those to whom the rules would apply of complying with those rules and any other controls to which they are subject.'.

The amendment fulfils a commitment that I gave in Committee to my hon. Friend the Member for Richmond and Barnes (Mr. Hanley). It requires a recognised supervisory body to have satisfactory arrangements for taking account of costs of compliance with its rules, and any other controls to which its members are subject. An analogous requirement is placed on recognised bodies under the Financial Services Act by clause 189 of the Bill.

Ms. Joyce Quin: The Opposition are not happy with the amendment, which requires the recognised supervisory bodies to be set up to take costs into account in the training of their rules. It seems to imply that if it is considered too expensive to comply with the rules a less good and less effective system will be introduced.
We expressed our worries in Committee, not in relation to this amendment—which had not yet appeared—but in relation to a Government new clause relating to the amendments to the Financial Services Act in which the principle of cost compliance was again introduced. At that time we expressed our concern that that might mean that cost-cutting would take precedence over investor protection. The concerns that we expressed were shared by other organisations, in particular the Consumers Association, which felt that that might lead to a second-rate regulatory service for consumers and investors.
We had an interesting discussion on the matter in Committee. My hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) talked about how those costs would be defined. He wanted to know whether they would be the direct costs of complying or the indirect costs. The former Parliamentary Under-Secretary of State for Corporate Affairs seemed to imply in his reply that it would be both direct and indirect costs. My hon. Friend referred also to something about which I am concerned which is the possible dangers of talking-up the costs of compliance and thereby introducing the danger of giving a convenient financial excuse for not having adequate regulation.
9 pm
The hon. Member for Beaconsfield (Mr. Smith) seemed to share some of the concerns that were expressed by the Opposition. He said that writing cost compliance into the Bill was unnecessary since those responsible would presumably seek to implement the provisions in the most cost-effective way. However, writing cost compliance into the Bill makes it seem as if costs are more important than implementing the necessary measures of regulation.
In Committee the Minister said that he would look carefully at the reservations expressed by the Opposition and such bodies as the Consumers Association. He said that he would see whether he could respond to them positively on Report. Unfortunately, the reverse seems to have happened and cost compliance has also been put forward for inclusion in this part of the Bill. Instead of removing the principle, we now see it reinforced in this amendment. I do not know whether the Minister felt strongly enough to introduce that extra reference to the principle of cost compliance or whether it was his ex-colleague, the former Under-Secretary of State, who decided that he did not agree with the reservations


expressed in Committee and wanted to reinforce the principle. Perhaps the Minister can explain exactly how that was arrived at.
I realise that it was one of the Government's supporters—the hon. Member for Richmond and Barnes (Mr. Hanley)—who urged the Government to include a provision of this kind. In Committee the hon. Gentleman declared an interest as the parliamentary adviser to the Institute of Chartered Accountants. He said that it was the institute that instigated the idea of cost compliance at this stage of the Bill. Can the Minister tell us that the amendment is not simply being introduced in response to one sectional interest? Opposition Members would like to be assured that the Minister has consulted widely before introducing the new amendment. Perhaps he can give us details of the consultations that he has had with various interests.
In Committee the Minister's former colleague tried to assure us that the interpretation of the principle of cost compliance would not be detrimental to consumers, the regulatory system or to investor protection. He said that he felt that it would simply mean that the regulator would seek to achieve compliance with the rules in the least costly and most cost-effective way. That emphasis on cost is still open to the other interpretation, which is simply that certain measures of investor protection or regulation might not be introduced simply because of the cost involved. We are concerned that the Bill might be interpreted in that way. We feel strongly that it should not be able to be interpreted in a way which would undermine the measures to have adequate and proper regulation of auditing. For that reason, we are unhappy about the proposed change and feel inclined to oppose it.

Mr. Hanley: The hon. Lady has rightly pointed out certain fears which may be present in the minds of those who view the clause from outside. I am happy in my conscience to state that in my view the clause is wholly reasonable because, as I said in Standing Committee, it mirrors one that has already been accepted by the House in the Financial Services Act. It merely brought into line the regulatory bodies such as the Institute of Chartered Accountants in England and Wales with the other direct regulatory bodies which exist under the Financial Services Act.
That point was aired in Standing Committee. I can do little better than to quote my hon. Friend the Minister, who said on 13 June 1989:
The Government believe that it is vital that regulatory bodies pay proper regard to the direct and indirect costs of complying with the rules. It is all too easy, even for practioner-based bodies, to decide upon an approach to a regulatory problem without having assessed the cost of the various alternatives and, unless costs are properly assessed, the regulatory system risks being more burdensome than necessary."—[Official Report, Standing Committee D, 13 June 1989; c.340.]
I feel strongly that the system must be cost-effective, as the hon. Lady rightly said, but it does not necessarily follow that it has to be the most costly. There has to be a balance or the whole system will collapse. We need a system that is reasonably cost-effective. We need the best system that we can get, without its imploding through too great expense.

Mr. John Garrett: The hon. Gentleman drew a direct analogy between the arrangements for taking into account the cost of compliance proposed here with what happened in the Financial Services Act. We are here discussing a largely self-regulatory profession which might take a different view of the costs and benefits of assiduity in controlling departures from standards from that taken by a body such as the Securities and Investments Board which acts directly on the authority of the Secretary of State under the Financial Services Act, so is the analogy entirely apt?

Mr. Hanley: It is indeed, but the hon. Gentleman is right to raise the subject. The joint monitoring unit that I visited recently is not the poodle, the child or the creature of a regulatory body such as the Institute of Chartered Accountants in England and Wales or the other bodies to which it refers. It is a very separate unit, and therefore analogous to FIMBRA or the other bodies which are made up of individual companies sending in subscriptions, acting not only as a regulatory body but as an advocate of the particular industry.
The way in which the self-regulatory organisations have developed shows that they have a dual role. They are not cosy clubs for members of the organisations concerned, but genuine regulatory organisations which are close enough to the bodies that they represent to understand the industry and to know any wrinkles that members of those organisations might try to use to dodge regulations. The self-regulatory system is therefore the most effective that we have.
The differences between the recognised professional bodies and the self-regulatory organisations are fewer than the hon. Gentleman might think. In my view, the similarities are greater. Of course, the self-regulatory organisations were set up specifically to take up a task with the recognised professional bodies. With the exception of one, they have existed as self-regulatory bodies for many years. They are based on a system of ethics which I believe has been proven over the years. It is a cost-effective system, but the Government have nevertheless inserted a clause providing that there must be satisfactory arrangements for taking the costs into account. That is acceptable, and shows a trust that the organisations will have to maintain.
If the hon. Gentleman's fears are borne out in future, I shall support him in calling for an end to the system. At the moment, happily, I believe that we have an extremely effective system. I am grateful to the Government for having added to its confidence by the clause, which is no more than reasonable and mirrors the Financial Services Act.

Mr. Cousins: I am grateful for the opportunity to contribute to the debate, and I thank my hon. Friend the Member for Gateshead, East (Ms. Quin) for kindly referring to the remarks that I made in Committee.
The debate on the amendment, and similar amendments, in Committee was inhibited by a sense of outrage among certain sections of the financial community about the apparent costs of the regulatory mechanisms set up under the Financial Services Act 1986. There was far too much of a stampede to give in to those pressures. As it has turned out, the chairman of the Securities and Investments Board has conducted himself extremely well in this matter. He has been calm, persistent in putting forward the correct


definition, and at the same time has drawn up coherent proposals to deal with the underlying concerns that people have expressed.
The debate in Committee was far too inhibited by what one may regard as the Poujadist section of the financial markets. A number of unfortunate public statements contributed to the attempted undermining of the public standing of the regulatory bodies set up under the Financial Services Act. It has transpired that because of the chairman's integrity and persistence, and because of the way in which he bent to his task and was not distracted from it by all the noises to which he was subjected, that danger has been avoided. So long as that individual holds his current position and continues to work with the people with whom he currently works, we shall have no fears in that respect.
None the less, my hon. Friend the Member for Gateshead, East was right to draw the matter to our attention, because we are dealing not with regulatory bodies but with individual professional standards and performance. The only consideration should be securing the highest possible standards of personal professional repute.
There has been a train of examples of what can go wrong. Serious questions are being asked, not least in reports by inspectors of the Department of Trade and Industry. It is unfortunate that a shadow is being cast over the new bodies that will be set up and the current bodies, if they are to take over the task of regulation. The only consideration for the regulatory bodies, when exercising their regulatory powers over the individuals in their profession and the standards that they attain, must be to ensure that those standards are the highest.
The amendment is unfortunate, and before moving it the Government would have been better advised to have recovered from their temporary panic about the costs of setting up regulatory mechanisms.

Mr. Forth: I have been trying to understand why Labour Members are expressing concern, because I believe that they are missing the blindingly obvious. Perhaps in the wake of this evening's excitement that is understandable.
We are trying to achieve a measure of practicality and effectiveness. If we are to make the rules precisely to achieve the high standards that the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) mentioned, it is only sensible and essential to ensure that regard is paid to their cost. We do not want to end up—I do not think that it is a great danger, but let us ensure that it does not happen—with an over-enthusiastic regulatory body which rushes off and seeks to lay down rules so onerous that they drive these activities out of existence.
9.15 pm
That is the answer to the hon. Member for Gateshead, East (Ms. Quin) who asked about the consumer's interest. We have an effective profession operating in the interests of the community as a whole, which includes the business community and consumers. Consumers want a profession which operates effectively, so its rules must not only be effective but must not be so onerous as to drive people out of business. My hon. Friend the Member for Richmond and Barnes (Mr. Hanley) ably illustrated that point.
The hon. Member for Gateshead, East asked what the costs mean. That was a slightly strange question, given the

profession that we are discussing. If she does not know what the costs mean, I cannot say with greater confidence what is meant.

Mr. Cousins: The Minister must descend from his talent for occasional Poujadism and return to the subject of the debate. My hon. Friend the Member for Gateshead, East (Ms. Quin) put a clear question to him. Does it mean direct costs, including indirect costs, or does it mean direct costs alone? That can make a considerable difference. The Minister would be better occupied using fewer knockabout tactics and applying his mind to those specific questions.

Mr. Forth: We are talking about professional accountants, not shopkeepers. The hon. Gentleman is in danger of getting the two confused. I shall not attempt to give a detailed answer to that question. It is not my job to set about defining the framework of costs to be taken into account. The bodies concerned will know well the kind of relevant costs involved. It would be inappropriate for me to answer, although it might be appropriate for my hon. Friend the Member for Richmond and Barnes to give us a long dissertation on the relevant costs.

Mr. Hanley: rose——

Mr. Forth: My hon. Friend is about to do so. I give way to him.

Mr. Hanley: I am grateful to my hon. Friend for his brief invitation. The best way to regulate the investment business is to have a full-time inspector based permanently on site as an independent advisers business. That would cost so much that the independent adviser would give up doing the job. He would not bother to help the public. For chartered accountants, it would mean that a person who was professionally qualified and whose ethics were such as to lead him to concentrate not only on independence but on truth and fairness would be driven out of giving investment advice.
It cannot be in the consumer's interests for all those who currently give independent advice, especially when they are backed by a royal charter and a history of service to the public, to be driven from giving a particular service to the public purely because the costs are so great that it is not worth being in the business. That is why we need. a balance between having a regulated trade, such as one advising the public, and having costs that are reasonable in terms of providing regulation over those who practise.

Mr. Forth: I am grateful to my hon. Friend.
I have tried to answer the Opposition's questions, and I hope that I have succeeded. As I am conscious of the passage of time and wish to ensure that we have every opportunity to consider the Bill in detail, I shall leave it at that and hope that the House will support the amendment.

Ms. Quin: Having listened to the Minister's few words, I am not reassured. He has not responded to some of my questions. I asked him what consultations he had had and whether he had spoken just to the one sectional interest which we knew was keen on getting the amendment introduced. He also did not answer my question about how exactly it was decided to include in the Bill references to cost compliance in addition to the one reference that had been decided in Standing Committee discussions on amendments to the Financial Services Act 1986.
The Minister said that he could not understand why we were raising these matters. Perhaps I should remind him


that his former ministerial colleague in the Standing Committee, the hon. Member for Warwickshire, North (Mr. Maude), said that he could well understand the concerns that we were raising about this and also those expressed by the Consumers Association and others, although he felt that they were unfounded. I found that response easier to cope with than the present Minister's complete lack of awareness about why we feel that this issue is so important.
We want adequate and proper regulation, not cost-cutting regulation. That is why we are concerned about the amendment and why I urge my hon. Friends to oppose it.

Question put, That the amendment be made:—

The House divided: Ayes 151, Noes 57.

Division No. 355]
[9.20 pm


AYES


Aitken, Jonathan
Glyn, Dr Alan


Alexander, Richard
Goodlad, Alastair


Amos, Alan
Goodson-Wickes, Dr Charles


Arbuthnot, James
Gorman, Mrs Teresa


Arnold, Jacques (Gravesham)
Greenway, John (Ryedale)


Atkinson, David
Gregory, Conal


Baker, Nicholas (Dorset N)
Griffiths, Peter (Portsmouth N)


Bennett, Nicholas (Pembroke)
Ground, Patrick


Blaker, Rt Hon Sir Peter
Hague, William


Boscawen, Hon Robert
Hamilton, Hon Archie (Epsom)


Boswell, Tim
Hamilton, Neil (Tatton)


Bowden, A (Brighton K'pto'n)
Hampson, Dr Keith


Bowis, John
Hanley, Jeremy


Brazier, Julian
Hargreaves, Ken (Hyndburn)


Brown, Michael (Brigg &amp; Cl't's)
Harris, David


Browne, John (Winchester)
Hayes, Jerry


Buck, Sir Antony
Hayhoe, Rt Hon Sir Barney


Burns, Simon
Hayward, Robert


Butcher, John
Hughes, Robert G. (Harrow W)


Butler, Chris
Hunt, Sir John (Ravensbourne)


Butterfill, John
Hunter, Andrew


Carlisle, John, (Luton N)
Irvine, Michael


Carlisle, Kenneth (Lincoln)
Jack, Michael


Carrington, Matthew
Jackson, Robert


Carttiss, Michael
Janman, Tim


Cash, William
Johnson Smith, Sir Geoffrey


Channon, Rt Hon Paul
Jones, Gwilym (Cardiff N)


Chapman, Sydney
Key, Robert


Chope, Christopher
Kilfedder, James


Clark, Dr Michael (Rochford)
Kirkhope, Timothy


Clark, Sir W. (Croydon S)
Knapman, Roger


Colvin, Michael
Knight, Greg (Derby North)


Conway, Derek
Knowles, Michael


Coombs, Anthony (Wyre F'rest)
Lester, Jim (Broxtowe)


Cran, James
Lilley, Peter


Davies, Q. (Stamf'd &amp; Spald'g)
Lord, Michael


Davis, David (Boothferry)
Lyell, Sir Nicholas


Day, Stephen
Maclean, David


Devlin, Tim
McNair-Wilson, Sir Patrick


Dicks, Terry
Malins, Humfrey


Dorrell, Stephen
Mans, Keith


Dover, Den
Martin, David (Portsmouth S)


Dunn, Bob
Maxwell-Hyslop, Robin


Durant, Tony
Mellor, David


Evennett, David
Meyer, Sir Anthony


Fallon, Michael
Mills, Iain


Fenner, Dame Peggy
Mitchell, Sir David


Fishburn, John Dudley
Morris, M (N'hampton S)


Fookes, Dame Janet
Morrison, Sir Charles


Forsyth, Michael (Stirling)
Moss, Malcolm


Forth, Eric
Nelson, Anthony


French, Douglas
Neubert, Michael


Gale, Roger
Newton, Rt Hon Tony


Gardiner, George
Norris, Steve


Garel-Jones, Tristan
Oppenheim, Phillip


Gill, Christopher
Page, Richard





Paice, James
Thompson, D. (Calder Valley)


Pattie, Rt Hon Sir Geoffrey
Thompson, Patrick (Norwich N)


Pawsey, James
Thurnham, Peter


Peacock, Mrs Elizabeth
Townsend, Cyril D. (B'heath)


Porter, Barry (Wirral S)
Tracey, Richard


Porter, David (Waveney)
Twinn, Dr Ian


Portillo, Michael
Waddington, Rt Hon David


Powell, William (Corby)
Walden, George


Raison, Rt Hon Timothy
Waller, Gary


Redwood, John
Ward, John


Rhodes James, Robert
Wardle, Charles (Bexhill)


Riddick, Graham
Watts, John


Ridley, Rt Hon Nicholas
Wheeler, John


Sackville, Hon Tom
Widdecombe, Ann


Shaw, David (Dover)
Winterton, Mrs Ann


Shepherd, Richard (Aldridge)
Wood, Timothy


Smith, Tim (Beaconsfield)
Young, Sir George (Acton)


Soames, Hon Nicholas



Stern, Michael
Tellers for the Ayes:


Stradling Thomas, Sir John
Mr. David Heathcoat-Amory and Mr. Irvine Patnick.


Taylor, John M (Solihull)



Taylor, Teddy (S'end E)





NOES


Allen, Graham
Illsley, Eric


Ashton, Joe
Jones, Martyn (Clwyd S W)


Banks, Tony (Newham NW)
Leighton, Ron


Barnes, Harry (Derbyshire NE)
Macdonald, Calum A.


Battle, John
Madden, Max


Benn, Rt Hon Tony
Meale, Alan


Bennett, A. F. (D'nt'n &amp; R'dish)
Michael, Alun


Bermingham, Gerald
Michie, Bill (Sheffield Heeley)


Buchan, Norman
Morgan, Rhodri


Campbell, Ron (Blyth Valley)
Nellist, Dave


Clay, Bob
Patchett, Terry


Cousins, Jim
Powell, Ray (Ogmore)


Cox, Tom
Quin, Ms Joyce


Cryer, Bob
Reid, Dr John


Cummings, John
Richardson, Jo


Dewar, Donald
Robinson, Geoffrey


Dixon, Don
Ross, Ernie (Dundee W)


Dobson, Frank
Skinner, Dennis


Fields, Terry (L'pool B G'n)
Spearing, Nigel


Flannery, Martin
Taylor, Mrs Ann (Dewsbury)


Flynn, Paul
Wall, Pat


Foster, Derek
Wareing, Robert N.


Foulkes, George
Welsh, Andrew (Angus E)


Fyfe, Maria
Welsh, Michael (Doncaster N)


Galloway, George
Winnick, David


Garrett, John (Norwich South)
Wise, Mrs Audrey


George, Bruce



Golding, Mrs Llin
Tellers for the Noes:


Gould, Bryan
Mr. Frank Haynes and Mr. Ken Eastham.


Hinchliffe, David



Hughes, John (Coventry NE)

Question accordingly agreed to.

Schedule 12

RECOGNITION OF PROFESSIONAL QUALIFICATION

Mr. Hanley: I beg to move amendment No. 304, in page 253, line 44, leave out from 'as' to end of line 45 and insert
'auditor under the Companies (Northern Ireland) Order 1986 or under the law of a country or territory outside the United Kingdom where it appears to the Secretary of State that the law and practice with respect to the audit of company accounts is similar to that in the United Kingdom.'.
Ever since statutory requirements on auditors' qualifications were introduced into United Kingdom law in the 1940s, members of the Institute of Chartered Accountants in Ireland have been qualified for appointment as auditors in the United Kingdom regardless of whether their training was received in the Republic or in Northern Ireland. Correspondingly, persons qualified in the United Kingdom have always been able to audit the accounts of companies incorporated in the Republic. The


justification for that is that company law in the Republic is similar to that in the United Kingdom. I taught company law in Ireland for many years and the similarities between the Companies Act 1948 and the Irish Companies Act 1963 were striking, except for one thing—the Irish Act was twice as long because it was printed in Irish on one side.
A common body of accounting and auditing standards also applies throughout the British Isles. The amendment would allow the present situation to continue by enabling the Secretary of State to recognise, for the purpose of an auditor's qualification, training in the company audit work of any country in which the law and practice are similar to that in the United Kingdom. The amendment therefore goes slightly further than facilitating auditors in the Republic. After 1992, qualifications and practice may become increasingly similar in various countries.

Mr. John Garrett: Will the hon. Member for Richmond and Barnes (Mr. Hanley) explain what is meant by
where … the law and practice with respect to the audit of company accounts is similar to that in the United Kingdom."?
Is he also saying that accounting standards would to all intents and purposes he the same? Is the hon. Gentleman also making observations on the level of qualifications required so that they are comparable in both countries, so that auditors in Britain and in the Irish Republic would be qualified to the same standards and operating within the same codes of practice?

Mr. Hanley: Exactly that. The qualifications of Irish and United Kingdom chartered accountants are, I believe, exactly the same both in terms of the nature of their training and in terms of the audit work that they carry out once qualified and in order to become qualified.
Although the hon. Gentleman is extremely wise and knowledgeable and may well know this fact, it may interest the House to know that the Institute of Chartered Accountants in Ireland covers both Northern Ireland and Southern Ireland, so part of the United Kingdom already receives qualifications according to a law of Ireland. It therefore seems wholly sensible that the training leading to qualification should be recognised in statute as being exactly analogous. The provision would also facilitate United Kingdom accountants training in the Republic of Ireland.
The provision merely recognises the existing realities of training and qualification and I believe that it will be seen by the Irish Republic as a friendly gesture from our Government.

Mr. Cousins: I should be grateful if the hon. Member for Richmond and Barnes (Mr. Hanley) and the Minister could clarify a few points. I well recollect our discussions on this matter in Committee when I believe that it was the hon. Member for Richmond and Barnes who informed us that the Prime Minister of Ireland, Charles Haughey, was an accountant and would be qualified under these provisions. Even the most devoted Unionist might have a slight feeling of trepidation about that eventuality. None the less, horse racing is popular in both the United Kingdom and the South of Ireland, so we may look forward to a happy coming together on that point. Is my thinking correct?

Mr. Hanley: A chartered accountant, whether trained in the Republic of Ireland or the United Kingdom, divorces himself from his political feelings and preferences

when practising as a chartered accountant, so whatever the hon. Gentleman's feelings about the President of the Republic of Ireland, I assure the hon. Gentleman that as a chartered accountant Mr. Haughey would be totally independent. In other words, the hon. Gentleman's thinking was indeed correct.

Mr. Forth: As my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) has just said, the Institute of Chartered Accountants in Ireland is specifically recognised in the present provisions on the qualifications of auditors in section 389 of the Companies Act 1985. All its members—whether trained in the Republic or in Northern Ireland—are therefore qualified in law to audit the accounts of British companies. That reflects the way in which company law and auditing practices in Britain and Ireland have developed hand in hand. Auditing standards and guidelines developed by the Auditing Practices Committee apply equally to the Republic of Ireland and to Great Britain. That answers the point raised by the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins).
There may be a case for considering whether the work involved in auditing companies in the Irish Republic is so similar to United Kingdom company audit work that practical training in such work could count towards the Bill's requirements on the content of practical training. In any case, I am happy to give my support to the amendment moved by my hon. Friend the Member for Richmond and Barnes, and I hope that the House will join me.

Amendment agreed to.

Clause 43

TIME LIMITS FOR PROSECUTION OF OFFENCES

Mr. Forth: I beg to move amendment No. 71, in page 56, line 27, after 'tried' insert 'on an information laid'.

Mr. Deputy Speaker: With this it will be convenient to consider Government amendment No. 72.

Mr. Forth: These two amendments take account of a point that came to light only at a late stage in our proceedings. They bring the period in clause 43, within which prosecution in England and Wales of a person who has committed an offence under part II must take place, into line with the standard provisions on time limits for the prosecution of offences. At present clause 43 has the effect that the trial must commence no later than three years after its commission. The amendments correct that to three years after the relevant information was laid, which is already the effect of the clause as far as Scotland is concerned.

Amendment agreed to.

Amendment made: No. 72, in page 56, line 40. after `information' insert 'laid'.—[Mr. Forth.]

Mr. Forth: I beg to move amendment No. 73, in page 59, line 28, leave out 'the order' and insert 'an order under section 46'.
This is a consequential amendment to an amendment agreed in Committee which enabled the Secretary of' State to make further orders after the delegation order conferring more functions on the statutory body or resuming functions already conferred. This amendment extends the immunity and damages given to the statutory body in clause 48 so that it covers functions conferred on


it by further orders. The immunity conferred on the statutory body will therefore, as intended, be co-extensive with any functions and exercises under the Bill.

Amendment agreed to.

Amendments made: No. 74, in page 60, line 16, leave out clause 50.

No. 75, in page 261, line 33, leave out schedule 15.—[Mr. Forth.]

Clause 52

MINOR DEFINITIONS

Amendment made: No. 76. in page 61, line 8, at end insert—
'"enactment" includes an enactment contained in subordinate legislation within the meaning of the Interpretation Act 1978;'.—[Mr. Forth.]

Clause 53

INDEX OF DEFINED EXPRESSIONS

Amendment made: No. 77, in page 61, line 38, at end


'enactment
section 52(1)'.—[Mr. Forth.]

New Clause 45

INVESTIGATION OF UNREGISTERED COMPANIES

'. In Schedule 22 to the Companies Act 1985 (provisions applying to unregistered companies), for the entry relating to Part XIV substitute—


"Part XIV (except section 446)
Investigation of companies and their affairs; requisition of documents.
—".'.—[Mr. Redwood.]

Brought up, and read the First time.

Mr. Deputy Speaker: With this it will be convenient to discuss Government amendments Nos. 78 to 80.

Mr. Redwood: I beg to move, That the clause be read a Second time.
As a consequence of certain repeals of provisions in the Companies Act 1985 by the Financial Services Act 1986, unregistered companies which at present fall within the scope of section 447 of the 1985 Act would no longer be covered. Section 447 gives the Secretary of State power to require documents for inspection. These amendments will ensure that section 447 powers continue to apply to unregistered companies.
The purpose of this amendment is to preserve the status quo. There will be no widening or narrowing of the powers.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 46

AMENDMENT OF THE BUILDING SOCIETIES ACT 1986

'. In section 53 of the Building Societies Act 1986 (confidentiality of information obtained by the Building Societies Commission), in subsection (7)(b) (functions of Secretary of State for purposes of which disclosure may be made) after sub-paragraph (ii) insert—




", or (iii) Part II, III or VII of the Companies Act 1989;",'.—[Mr. Redwood.]

Brought up, and read the First time.

Mr. Deputy Speaker: With this it will be convenient to discuss Government new clause 47—Amendments of the Banking Act 1987—and Government amendments Nos. 81 and 82.

Mr. Redwood: I beg to move, That the clause be read a Second time.
These amendments are consequential on other provisions in parts II, III and VII of the Bill. They amend the Building Societies Act 1986, the Banking Act 1987 and clause 84 of the Bill, to provide gateways for the disclosure of restricted information for the purpose of enabling or assisting the Secretary of State's functions under parts II, III and VII of the Bill.

Mr. Cousins: Some dimensions of the new clause commend themselves to me, because I believe that it is important to have gateways through which information about activity in the building society world can be made available to the Government in pursuit of their necessary regulatory activities.
Those of us who have dealt with constituency and other problems arising from the demutualisation of Abbey National are very well aware of the need for much better information to be available to the public authorities to carry out their duties. The Minister has been perfectly fair but a little mysterious about how he proposes to use the powers that he is taking under the new clause. A little elucidation on that point would not come amiss in view of public disquiet about Abbey National and the way in which that affair was conducted.

Mr. Redwood: The idea is to provide gateways for information such as that passed to inspectors appointed under sections 94 or 177 of the Financial Services Act 1986, as well as inspectors appointed under part XIV of the Companies Act 1985. These are the normal types of investigations launched when there is reason to suspect fraud or malfeasance or other such problems.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 47

AMENDMENTS OF THE BANKING ACT 1987

'.—(1) In section 84(1) of the Banking Act 1987 (disclosure of information obtained under that Act), the Table showing the authorities to which, and functions for the purposes of which, disclosure may be made is amended as follows.

(2) In the entry relating to the Secretary of State. in column 2, for "or the Financial Services Act 1986" substitute ", the Financial Services Act 1986 or Part II, III or VII of the Companies Act 1989".

(3) For the entry relating to inspectors appointed by the Secretary of State substitute—


"An inspector appointed under Part XIV of the Companies Act 1985 or section 94 or 177 of the Financial Services Act 1986.
Functions under that Part or that section.".

(4) For the entry beginning "A person authorised by the Secretary of State" substitute—




"A person authorised to exercise powers under section 44 of the Insurance Companies Act 1982, section 447 of the Companies Act 1985, section 106 of the Financial Services Act 1986 or section 80 of the Companies Act 1989.
Functions under that section.".

(5) For the entry relating to a designated agency or transferee body or the competent authority (within the meaning of the Financial Services Act 1986) substitute—


"A designated agency (within the meaning of the Financial Services Act 1986).
Functions under the Financial Services Act 1986 or Part VII of the Companies Act 1989.


A transferee body or the competent authority (within the meaning of the Financial Services Act 1986).
Functions under the Financial Services Act 1986.".'.—[Mr. Redwood.]

Brought up, read the First and Second time, and added to the Bill.

Clause 62

SECRETARY OF STATE'S POWER TO REQUIRE PRODUCTION OF DOCUMENTS

Amendment made: No. 78, in page 65, line 22, at end insert—
'(1A) Omit subsection (1) (bodies in relation to which powers exercisable), and—
(a) in subsections (2) and (3) for "any such body" substitute "a company",
(b) in subsections (4) and (5) for "any body" and "a body" substitute "a company", and
(c) in subsections (5) and (6) for "the body" substitute "the company".'.—[Mr. Redwood.]

Clause 64

PROVISION FOR SECURITY OF INFORMATION OBTAINED

Amendment made: No. 79, in page 68, line 3, at end insert—
'(aa) in the opening words for "body" (twice) substitute "company";'.—[Mr. Redwood.]

Clause 65

PUNISHMENT FOR DESTROYING, MUTILATING, &C. COMPANY DOCUMENTS

Amendment made: No. 80, in page 69, line 37, at end insert—
'(1A) In subsection (1) for the opening words down to "insurance company" substitute "An officer of a company, or of an insurance company", for "body's" substitute "company's" and for "the body" substitute "the company".'.—[Mr. Redwood.]

Clause 84

EXERCISE OF POWERS IN RELATION TO NORTHERN IRELAND

Amendment made: No. 81, in page 84, line 27, after '1985,' insert 'section 53 or 54 of the Building Societies Act 1986.'.

No. 82, in page 84, line 28, after '1986' insert ', section 84 of the Banking Act 1987'.—[Mr. Redwood.]

New Clause 20

CHARGES REQUIRING REGISTRATION

'. The following sections are inserted in Part XII of the Companies Act 1985—

Registration in the company charges register Introductory provisions

395.—(1) The purpose of this Part is to secure the registration of charges on a company's property.

(2) In this Part—
charge" means any form of security interest (fixed or floating) over property, other than an interest arising by operation of law; and
property", in the context of what is the subject of a charge, includes future property.

(3) It is immaterial for the purposes of this Part where the property subject to a charge is situated.

(4) References in this Part to "the registrar" are—
(a) in relation to a company registered in England and Wales, to the registrar of companies for England and Wales, and
(b) in relation to a company registered in Scotland, to the registrar of companies for Scotland;
and references to registration, in relation to a charge. are to registration in the register kept by him under this Part.

Charges requiring registration

396.—(1) The charges requiring registration under this Part are—

(a) a charge on land or any interest in land, other than—
(i) in England and Wales, a charge for rent or any other periodical sum issuing out of the land,
(ii) in Scotland, a charge for any rent, ground annual or other periodical sum payable in respect of the land;

(b) a charge on goods or any interest on goods, other than a charge under which the chargee is entitled to possession either of the goods or of a document of title to them,

(c) a charge on intangible movable property (in Scotland, incorporeal moveable property) of any of the following descriptions—

(i) goodwill,
(ii) intellectual property,
(iii) book debts (whether book debts of the company or assigned to the company),
(iv) uncalled share capital of the company or calls made but not paid,

(d) a charge for securing an issue of debentures, or

(e) a floating charge on the whole or part of the company property.

(2) The descriptions of charge mentioned in subsection (1) shall be construed as follows—
(a) a charge on a debenture forming part of an issue or series shall not be treated as falling within paragraph (a) or (b) by reason of the fact that the debenture is secured by a charge on land or goods (or on an interest in land or goods);
(b) in paragraph (b) "goods" means any tangibie movable property (in Scotland, corporeal moveable property) other than money;
(c) a charge is not excluded from paragraph (b) because the chargee is entitled to take possession in case of default or on the occurrence of some other event;
(d) in paragraph (c)(ii) "intellectual property" means—
(i) any patent, trade mark, service mark, registered design, copyright or design right, or
(ii) any licence under or in respect of any such right;
(e) a debenture which is part of an issue or series shall not be treated as a book debt for the purposes of paragraph (c)(iii);
(f) the deposit by way of security of a negotiable instrument given to secure the payment of book debts shall not be treated for the purposes of paragraph (c)(iii) as a charge on book debts;


(g) a shipowner's lien on subfreights shall not be treated as a charge on book debts for the purposes of paragraph (c)(iii) or as a floating charge for the purposes of paragraph (e).

(3) Whether a charge is one requiring registration under this Part shall be determined—
(a) in the case of a charge created by a company, as at the date the charge is created, and
(b) in the case of a charge over property acquired by a company, as at the date of the acquisition.

(4) The Secretary of State may by regulations amend subsections (1) and (2) so as to add any description of charge to, or remove any description of charge from, the charges requiring registration under this Part.

(5) Regulations under this section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(6) In the following provisions of this Part references to a charge are, unless the context otherwise requires, to a charge requiring registration under this Part.

Where a charge not otherwise requiring registration relates to property by virtue of which it requires to be registered and to other property, the references are to the charge so far as it relates to property of the former description.".'.—[Mr. Forth.]

Brought up, and read the First time.

Mr. Deputy Speaker: With this it will be convenient to discuss Government new clause 21—The companies charges register.

Mr. Forth: I beg to move, That the clause be read a Second time.
New clause 20 would replace clause 89 in the Bill. It contains a number of amendments to clauses 395 and 396. The amendments mostly make some technical but important alterations to terms and provisions that determine whether a charge is registrable. The broad aim is to ensure that we do not require registration if it will cause undue damage to commercial practice. New clause 21 would replace clause 90 of the Bill. It contains amendments to new section 397 but inserts no new provisions. The amendments simply omit an illustrative list and a provisional notice that is replaced by a new provision in clause 30.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 21

THE COMPANIES CHARGES REGISTER

'.The following section is inserted in Part XII of the Companies Act 1985—

The Companies Charges Register

397.—(1) The registrar shall keep for each company a register, in such form as he thinks fit, of charges on property of the company.

(2) The register shall consist of a file containing with respect to each charge the particulars and other information delivered to the registrar under the provisions of this Part.

(3) Any person may require the registrar to provide a certificate stating the date on which any specified particulars of, or other information relating to, a charge were delivered to him.

(4) The certificate shall be signed by the registrar or authenticated by his official seal.

(5) The certificate shall be conclusive evidence that the specified particulars or other information were delivered to the registrar no later than the date stated in the certificate; and it shall be presumed unless the contrary is proved that they were not delivered earlier than that date.".'.—[Mr. Forth.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 22

DELIVERY OF PARTICULARS FOR REGISTRATION

`. The following sections are inserted in Part XII of the Companies Act 1985—

Company's duty to deliver particulars of charge for registration

398.—(1) It is the duty of a company which creates a charge, or acquires property subject to a charge—
(a) to deliver the prescribed particulars of the charge, in the prescribed form, to the registrar for registration, and
(b) to do so within 21 days after the date of the charge's creation or, as the case may be, the date of the acquisition;
but particulars of a charge may be delivered for registration by any person interested in the charge.

(2) Where the particulars are delivered for registration by a person other than the company concerned, that person is entitled to recover from the company the amount of any fees paid by him to the registrar in connection with the registration.

(3) If a company fails to comply with subsection (1), then, unless particulars of the charge have been delivered for registration by another person, the company and every officer of it who is in default is liable to a fine.

(4) Where prescribed particulars in the prescribed form are delivered to the registrar for registration, he shall file the particulars in the register and shall note, in such form as he thinks fit, the date on which they were delivered to him.

(5) The registrar shall send to the company and any person appearing from the particulars to be the chargee, and if the particulars were delivered by another person interested in the charge to that person, a copy of the particulars filed by him and of the note made by him as to the date on which they were delivered.

Effect of failure to deliver particulars of registration

399.—(1) Where a charge is created by a company and no prescribed particulars in the prescribed form are delivered for registration within the period of 21 days after the date of the charge's creation, the charge is void against—
(a) an administrator or liquidator of the company, and
(b) any person who for value acquires an interest in or right over property subject to the charge,
where the relevant event occurs after the creation of the charge, whether before or after the end of the 21 day period.

This is subject to section 400 (later delivery of particulars).

(2) In this Part "the relevant event" means—
(a) in relation to the voidness of a charge as against an administrator or liquidator, the beginning of the insolvency proceedings, and
(b) in relation to the voidness of a charge as against a person acquiring an interest in or right over property subject to a charge, the acquisition of that interest or right;
and references to "a relevant event" shall be construed accordingly.

(3) Where a relevant event occurs on the same day as the charge is created, it shall be presumed to have occurred after the charge is created unless the contrary is proved.

Late delivery of particulars

400.—(1) Where prescribed particulars of a charge created by a company, in the prescribed form, are delivered for registration more than 21 days after the date of the charge's creation, section 399(1) does not apply in relation to relevant events occurring after the particulars are delivered.

(2) However, where in such a case—
(a) the company is at the date of delivery of the particulars unable to pay its debts, or subsequently becomes unable to pay its debts in consequence of the transaction under which the charge is created, and
(b) insolvency proceedings begin before the end of the relevant period beginning with the date of delivery of the particulars,
the charge is void as against the administrator or liquidator.

(3) For this purpose—
(a) the company is "unable to pay its debts" in the circumstances specified in section 123 of the Insolvency Act 1986; and


(b) the "relevant period" is—
(i) two years in the case of a floating charge created in favour of a person connected with the company (within the meaning of section 249 of that Act),
(ii) one year in the case of a floating charge created in favour of a person not so connected, and
(iii) six months in any other case.

(4) Where a relevant event occurs on the same day as the particulars are delivered, it shall be presumed to have occurred before the particulars are delivered unless the contrary is proved.".'.—[Mr. Forth.]

Brought up, and read the First time.

Mr. Forth: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Sir Paul Dean): With this it will be convenient to consider Government new clauses 23, 24 and 25.

Mr. Forth: The new clauses contain various amendments to existing provisions of part IV that relate primarily to the delivery of particulars for registration. New clause 22 would replace clause 91 of the Bill. It amends new sections 398, 399 and 400. The amendments are largely improvements to the drafting of the new sections. The principal amendment is that in new section 399(1). This makes it clear that an unregistered charge will not be void in respect of those acquiring an interest in property subject to the charge before the charge's creation.
New clause 23 would replace clause 92 of the Bill. It amends new section 401. Although the new clause contains a number of drafting changes, the only substantive amendment is in new section 401(1). This would allow further particulars of a variation to a charge to be delivered before the variation has become effective.
New clause 24 would replace clause 93 of the Bill. It contains a number of drafting amendments to new section 402. There are no substantive amendments.
New clause 25 would replace clause 94 of the Bill. It contains amendments to new section 403. We have widened the circumstances in which a memorandum may be delivered to the registrar. We have also amended new section 403 to ensure that a charge cannot become void if a memorandum is fraudulently delivered by the company while the charge still affects its property.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 23

DELIVERY OF FURTHER PARTICULARS

'. The following section is inserted in Part XII of the Companies Act 1985—

Delivery of further particulars

401.—(1) Further particulars of a charge, supplementing or varying the registered particulars, may be delivered to the registrar for registration at any time.

(2) Further particulars must be in the prescribed form signed by or on behalf of both the company and the chargee.

(3) Where further particulars are delivered to the registrar for registration and appear to him to be duly signed, he shall file the particulars in the register and shall note, in such form as he thinks fit, the date on which they were delivered to him.

(4) The registrar shall send to the company and any person appearing from the particulars to be the chargee, and if the particulars were delivered by another person interested in the charge to that other

person, a copy of the further particulars filed by him and of the note made by him as to the date on which they were delivered.".'.

Brought up, read the First and Second time, and added to the Bill.

New Clause 24

EFFECT OF OMISSIONS AND ERRORS IN REGISTERED PARTICULARS

'. The following section is inserted in Part XII of the Companies Act 1985—

Effect of omissions and errors in registered particulars

402.—(1) Where the registered particulars of a charge created by a company are not complete and accurate, the charge is void, as mentioned below, to the extent that rights are not disclosed by the registered particulars which would be disclosed if they were complete and accurate.

(2) The charge is void to that extent, unless the court on the application of the chargee orders otherwise, as against—
(a) an administrator or liquidator of the company, and
(b) any person who for value acquires an interest in or right over property subject to the charge,
where the relevant event occurs at a time when the particulars are incomplete or inaccurate in a relevant respect.

(3) Where a relevant event occurs on the same day as particulars or further particulars are delivered, it shall be presumed to have occurred before those particulars are delivered unless the contrary is proved.

(4) The court may order that the charge is effective as against an administrator or liquidator of the company if it is satisfied—
(a) that the omission or error is not likely to have misled materially to his prejudice any unsecured creditor of the company, or
(b) that no person became an unsecured creditor of the company at a time when the registered particulars of the charge were incomplete or inaccurate in a relevant respect.

(5) The court may order that the charge is effective as against a person acquiring an interest in or right over property subject to the charge if it is satisfied that he did not rely, in connection with the acquisition, on registered particulars which were incomplete or inaccurate in a relevant respect.

(6) For the purposes of this section an omission or inaccuracy with respect to the name of the chargee shall not be regarded as a failure to disclose the rights of the chargee.".'.

Brought up, read the First and Second time, and added to the Bill.

New Clause 25

MEMORANDUM OF CHARGE CEASING TO AFFECT COMPANY'S PROPERTY

The following section is inserted in Part XII of the Companies Act 1985—

Memorandum of charge ceasing to affect company's property

403.—(1) Where a charge of which particulars have been delivered ceases to affect the company's property, a memorandum to that effect may be delivered to the registrar for registration.

(2) The memorandum must be in the prescribed form signed by or on behalf of both the company and the chargee.

(3) Where a memorandum is delivered to the registrar for registration and appears to him to be duly signed, he shall file it in the register, and shall note, in such form as he thinks fit, the date on which it was delivered to him.

(4) The registrar shall send to the company and any person appearing from the memorandum to be the chargee, and if the memorandum was delivered by another person interested in


the charge to that person, a copy of the memorandum filed by him and of the note made by him as to the date on which it was delivered.

(5) If a duly signed memorandum is delivered in a case where the charge in fact continues to affect the company's property, the charge is void as against—
(a) an administrator or liquidator of the company, and
(b) any person who for value acquires an interest in or right over property subject to the charge,
where the relevant event occurs after the delivery of the memorandum.

(6) Where a relevant event occurs on the same day as the memorandum is delivered, it shall be presumed to have occurred before the memorandum is delivered unless the contrary is proved.".'.—[Mr. Forth.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 26

FURTHER PROVISIONS WITH RESPECT TO VOIDNESS OF CHARGES

'. The following sections are inserted in Part XII of the Companies Act 1985—

FURTHER PROVISIONS WITH RESPECT TO VOIDNESS OF CHARGES

Exclusion of voidness as against unregistered charges.

404.—(1) A charge is not void by virtue of this Part as against a subsequent charge unless some or all of the relevant particulars of that charge are duly delivered for registration—
(a) within 21 days after the date of its creation, or
(b) before complete and accurate relevant particulars of the earlier charge are duly delivered for registration.

(2) Where relevant particulars of the subsequent charge so delivered are incomplete or inaccurate, the earlier charge is void as against that charge only to the extent that rights are disclosed by registered particulars of the subsequent charge duly delivered for registration before the corresponding relevant particulars of the earlier charge.

(3) The relevant particulars of a charge for the purposes of this section are those prescribed particulars relating to rights inconsistent with those conferred by or in relation to the other charge.

Restrictions on voidness by virtue of this Part.

405.—(1) A charge is not void by virtue of this Part as against a person acquiring an interest in or right over property where the acquisition is expressly subject to the charge.

(2) Nor is a charge void by virtue of this Part in relation to any property by reason of a relevant event occuring after the company which created the charge has disposed of the whole of its interest in that property.

Effect of exercise of power of sale.

406.—(1) A chargee exercising a power of sale may dispose of property to a purchaser freed from any interest or right arising from the charge having become void to any extent by virtue of this Part—
(a) against an administrator or liquidator of the company, or
(b) against a person acquiring a security interest over property subject to the charge;
and a purchaser is not concerned to see or inquire whether the charge has become so void.

(2) The proceeds of the sale shall be held by the chargee in trust to be applied—

First, in discharge of any sum effectively secured by prior incumbrances to which the sale is not made subject;

Second, in payment of all costs, charges and expenses properly incurred by him in connection with the sale, or any previous attempted sale, of the property;

Third, in discharge of any sum effectively secured by the charge and incumbrances ranking pari passu with the charge;

Forth, in discharge of any sum effectively secured by incumbrances ranking after the charge;

and any residue is payable to the company or to a person authorised to give a receipt for the proceeds of the sale of the property.

(3) For the purposes of subsection (2)—

(a) prior incumbrances include any incumbrance to the extent that the charge is void as against it by virtue of this Part; and
(b) no sum is effectively secured by a charge to the extent that it is void as against an administrator or liquidator of the company.

(4) In this section—
(a) references to things done by a chargee include things done by a receiver appointed by him, whether or not the receiver acts as his agent;
(b) "power of sale" includes any power to dispose of, or grant an interest out of, property for the purpose of enforcing a charge (but in relation to Scotland does not include the power to grant a lease), and references to "sale" shall be construed accordingly; and
(c) "purchaser" means a person who in good faith and for valuable consideration acquires an interest in property.

(5) The provisions of this section as to the order of application of the proceeds of sale have effect subject to any other statutory provision (in Scotland), any other statutory provision or rule of law) applicable in any case.

(6) Where a chargee exercising a power of sale purports to dispose of property freed from any such interest or right as is mentioned in subsection (1) to a person other than a purchaser, the above provisions apply, with any necessary modifications, in relation to a disposition to a purchaser by that person or any successor in title of his.

(7) In Scotland, subsections (2) and (7) of section 27 of the Conveyancing and Feudal Reform (Scotland) Act 1970 apply to a chargee unable to obtain a discharge for any payment which he is required to make under subsection (2) above as they apply to a creditor in the circumstances mentioned in those subsections.

Effect of voidness on obligation secured

407.—(1) Where a charge becomes void to any extent by virtue of this Part, the whole of the sum secured by the charge is payable forthwith on demand; and this applies notwithstanding that the sum secured by the charge is also the subject of other security.

(2) Where the charge is to secure the repayment of money, the references in subsection (1) to the sum secured include any interest payable.".'.—[Mr. Forth.]

Brought up, and read the First time.

Mr. Forth: I beg to move, That the clause be read a Second time.
This new clause inserts new provisions restricting the effect of avoidance. It is designed principally to ensure that the sanctions of avoidance and partial avoidance should not have unduly adverse effects on those dealing with charges. If we do not limit the effect of avoidance in the ways proposed in the new clause, people might be less willing to deal with charges or the property subject to them. As a consequence, creditors might become reluctant to offer secured finance to companies in certain circumstances. The objective of much in the new clause is, therefore, to disapply the effect of avoidance either where it is unnecessary or where the disadvantages flowing from it would outweigh the benefits.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 27

ADDITIONAL INFORMATION TO BE REGISTERED

'. The following sections are inserted in Part XII of the Companies Act 1985—

Additional information to be registered Particulars of taking up of issue of debentures

408.—(1) Where particulars of a charge for securing an issue of debentures have been delivered for registration. it is the duty of the company—


(a) to deliver to the registrar for registration particulars in the prescribed form of the date on which any debentures of the issue are taken up, and of the amount taken up, and
(b) to do so before the end of the period of 21 days after the date on which they are taken up.

(2) Where particulars in the prescribed form are delivered to the registrar for registration under this section, he shall file them in the register.

(3) If a company fails to comply with subsection (1), the company and every officer of it who is in default is liable to a fine.

Notice of appointment of receiver or manager, &c.

409.—(1) If person obtains an order for the appointment of a receiver or manager of a company's property, or appoints such a receiver or manager under powers contained in an instrument, he shall within seven days of the order or of the appointment under those powers, give notice of that fact in the prescribed form to the registrar for registration.

(2) Where a person appointed receiver or manager of a company's property under powers contained in an instrument ceases to act as such receiver or manager, he shall, on so ceasing, give notice of that fact in the prescribed form to the registrar for registration.

(3) Where a notice under this section in the prescribed form is delivered to the registrar for registration, he shall file it in the register.

(4) If a person makes default in complying with the requirements of subsection (1) or (2), he is liable to a fine.

(5) This section does not apply in relation to companies registered in Scotland (for which corresponding provision is made by sections 53, 54 and 62 of the Insolvency Act 1986).

Notice of crystallisation of floating charge, &c.

410.—(1) The Secretary of State may by regulations require notice in the prescribed form to be given to the registrar of—
(a) the occurrence of such events as may be prescribed affecting the nature of the security under a floating charge of which particulars have been delivered for registration, and
(b) the taking of such action in exercise of powers conferred by a fixed or floating charge of which particulars have been delivered for registration, or conferred in relation to such a charge by an order of the court, as may be prescribed.

(2) The regulations may make provision as to—
(a) the persons by whom notice is required to be, or may be, given, and the period within which notice is required to be given;
(b) the filing in the register of the particulars contained in the notice and the noting of the date on which the notice was given; and
(c) the consequences of failure to give notice.

(3) As regards the consequences of failure to give notice of an event causing a floating charge to crystallise, the regulations may include provision to the effect that the crystallisation—
(a) shall be treated as ineffective until the prescribed particulars are delivered, and
(b) if the prescribed particulars are delivered after the expiry of the prescribed period, shall continue to be ineffective against such persons as may be prescribed,
subject to the exercise of such powers as may be conferred by the regulations on the court.

(4) The regulations may provide that if there is a failure to comply with such of the requirements of the regulations as may be prescribed, such persons as may be prescribed are liable to a fine.

(5) Regulations under this section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(6) Regulations under this section shall not apply in relation to a floating charge created under the law of Scotland by a company registered in Scotland.".'.—[Mr. Forth.]

Brought up, and read the First time.

Mr. Forth: I beg to move, That the clause be read a Second time.
This new clause would replace clause 95 of the Bill. It contains amendments to the new sections that require additional particulars to be delivered to the registrar. The amendments make changes to the additional particulars to be delivered in respect of debentures, the duties of the registrar to file notices relating to receivers and managers, and the application of new section 410 in the new clause under Scots law.

Mr. Cousins: When we talked earlier in another context about the costs of compliance of regulatory bodies, the Minister was keen that such bodies should take the cost of compliance into account. I was a little disturbed by what the Minister said in speaking to this new clause. I do not think that he took the legal sanctions in matters of this kind as seriously as they deserve to be taken. The new clause creates a new offence for which a fine may be imposed. Will the Minister outline what the size of that fine might be? This is referred to in section 408.

Mr. Forth: I cannot tell the hon. Member at this stage what the size of the fine will be.

Mr. Cousins: That is disgraceful.

Mr. Forth: In the nature of this sort of provision, it is unusual to specify the exact level of the fine. I should have thought that the hon. Gentleman would know that by now. I am surprised that, having sat through the Committee stage, he even has to ask the question. Throughout these important provisions, and I am glad that the hon. Gentleman has been following them, we have tried to strike a balance between endeavouring——

It being ten minutes to Ten o'clock, MR. DEPUTY SPEAKER proceeded, pursuant to the order this day, to put forthwith the Question already proposed from the Chair.

Question agreed to.

Clause read a Second time, and added to the Bill.

MR. DEPUTY SPEAKER then proceeded to put forthwith the Question on new clauses and new schedules, moved by a member of the Government, of which notice had been given, to that part of the Bill to be concluded at ten minutes to Ten o'clock.

New Clause 28

COPIES OF INSTRUMENTS AND REGISTER TO BE KEPT BY THE COMPANY

`.The following sections are inserted in Part XII of the Companies Act 1985—

COPIES OF INSTRUMENTS AND REGISTER TO BE KEPT BY COMPANY

'. The following sections are inserted in Part XII of the Companies Act 1985—

Copies of instruments and register to be kept by company Duty to keep copies of instruments and register

411.—(1) Every company shall keep at its registered office a copy of every instrument creating or evidencing a charge over the company's property.

In the case of a series of uniform debentures, a copy of one debenture of the series is sufficient.

(2) Every company shall also keep at its registered office a register of all such charges, containing entries for each charge giving a short description of the property charged, the amount of the charge and (except in the case of securities to bearer) the names of the persons entitled to it.

(3) This section applies to any charge, whether or not particulars are required to be delivered to the registrar for registration.

(4) If a company fails to comply with any requirement of this section, the company and every officer of it who is in default is liable to a fine.

Inspection of copies and register

412.—(1) The copies and the register referred to in section 411 shall be open to the inspection of any creditor or member of the company without fee; and to the inspection of any other person on payment of such fee as may be prescribed.

(2) Any person may request the company to provide him with a copy of—
(a) any instrument creating or evidencing a charge over the company's property, or
(b) any entry in the register of charges kept by the company, on payment of such fee as may be prescribed.

This subsection applies to any charge, whether or not particulars are required to be delivered to the registrar for registration.

(3) The company shall send the copy to him not later than ten days after the day on which the request is received or, if later, on which payent is received.

(4) If inspection of the copies or register is refused, or a copy requested is not sent within the time specified above—
(a) the company and every officer of it who is in default is liable to a fine, and
the court may by order compel an immediate inspection of the copies or register or, as the case may be, direct that the copy be sent immediately.".'.—[Mr. Redwood.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 29

POWER TO MAKE FURTHER PROVISION BY REGULATIONS

'. The following section is inserted in Part XII of the Companies Act 1985—

Supplementary provisions Power to make further provision by regulations.

413.—(1) The Secretary of State may by regulations make further provision as to the application of the provisions of this Part in relation to charges of any description specified in the regulations.

Nothing in the following provisions shall be construed as restricting the generality of that power.

(2) The regulations may require that where the charge is contained in or evidenced or varied by a written instrument there shall be delivered to the registrar for registration, instead of particulars or further particulars of the charge, the instrument itself or a certified copy of it together with such particulars as may be prescribed.

(3) The regulations may provide that a memorandum of a charge ceasing to affect property of the company shall not be accepted by the registrar unless supported by such evidence as may be prescribed, and that a memorandum not so supported shall be treated as not having been delivered.

(4) The regulations may also provide that where the instrument creating the charge is delivered to the registrar in support of such a memorandum, the registrar may mark the instrument as cancelled before returning it and shall send copies of the instrument cancelled to such persons as may be prescribed.

(5) The regulations may exclude or modify, in such circumstances and to such extent as may be prescribed, the operation of the provisions of this Part relating to the voidness of a charge.

(6) The regulations may require, in connection with the delivery of particulars, further particulars or a memorandum of the charge's ceasing to affect property of the company, the delivery of such supplementary information as may be prescribed, and may
(a) apply in relation to such supplementary information any provisions of this Part relating to particulars, further particulars or such a memorandum, and
(b) provide that the particulars, further particulars or memorandum shall be treated as not having been delivered until the required supplementary information is delivered.

(7) Regulations under this section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.".'.—[Mr. Redwood.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 30

OTHER SUPPLEMENTARY PROVISIONS

'. The following sections are inserted in Part XII of the Companies Act 1985—

Date of creation of charge

414.—(1) References in this Part to the date of creation of a charge by a company shall be construed as follows.

(2) A charge created under the law of England and Wales shall be taken to be created—
(a) in the case of a charge created by an instrument in writing, when the instrument is executed by the company or, if its execution by the company is conditional, upon the conditions being fulfilled, and
(b) in any other case, when an enforceable agreement is entered into by the company conferring a security interest intended to take effect forthwith or upon the company acquiring an interest in property subject to the charge.

(3) A charge created under the law of Scotland shall be taken to be created—
(a) in the case of a floating charge, when the instrument creating the floating charge is executed by the company, and
(b) in any other case, when the right of the person entitled to the benefit of the charge is constituted as a real right.

(4) Where a charge is created in the United Kingdom but comprises property outside the United Kingdom, any further proceedings necessary to make the charge valid or effectual under the law of the country where the property is situated shall be disregarded in ascertaining the date on which the charge is to be taken to be created.

Prescribed particulars and related expressions

415.—(1) References in this Part to the prescribed particulars of a charge are to such particulars of, or relating to, the charge as may be prescribed.

(2) The prescribed particulars may, without prejudice to the generality of subsection (1), include—
(a) whether the company has undertaken not to create other charges ranking in priority to or pari passu with the charge, and
(b) whether the charge is a market charge within the meaning of Part VII of the Companies Act 1989 or a charge to which the provisions of that Part apply as they apply to a market charge.

(3) References in this Part to the registered particulars of a charge at any time are to such particulars and further particulars of the charge as have at that time been duly delivered for registration.

(4) References in this Part to the registered particulars of a charge being complete and accurate at any time are to their including all the prescribed particulars which would be required to be delivered if the charge were then newly created.

Notice of matters disclosed on register

416.—(1) A person taking a charge over a company's property shall be taken to have notice of any matter requiring registration and disclosed on the register at the time the charge is created.

(2) Otherwise, a person shall not be taken to have notice of any matter by reason of its being disclosed on the register or by reason of his having failed to search the register in the course of making such inquiries as ought reasonably to be made.

(3) The above provisions have effect subject to any other statutory provisions as to whether a person is to be taken to have notice of any matter disclosed on the register.

Power of court to dispense with signature

417.—(1) Where it is proposed to deliver further particulars of a charge, or to deliver a memorandum of a charge ceasing to affect the company's property, and—


(a) the chargee refuses to sign or authorise a person to sign on his behalf, or cannot be found, or
(b) the company refuses to authorise a person to sign on its behalf,

the court may on the application of the company or the chargee, or of any other person having a sufficient interest in the matter, authorise the delivery of the particulars or memorandum without that signature.

(2) The order may be made on such terms as appear to the court to he appropriate.

(3) Where particulars or a memorandum are delivered to the registrar for registration in reliance on an order under this section, they must be accompanied by an office copy of the order.
In such a case the references in sections 401 and 403 to the particulars or memorandum being duly signed are to their being otherwise duly signed.

The registrar shall file the office copy of the court order along with the particulars or memorandum.".'.—[Mr. Redwood.]

Brought up. read the First and Second time, and added to the Bill.

New Clause 31

INTERPRETATION, & C.

'. The following sections arc inserted in Part XII of the Companies Act 1985—

Regulations

418. Regulations under any provision of this Part, or prescribing anything for the purposes of any such provision—
(a) may make different provision for different cases, and
(b) may contain such supplementary, incidental and transitional provisions as appear to the Secretary of State to be appropriate.

Minor definitions

419.—(1) In this Part—
chargee" means the person for the time being entitled to exercise the security rights conferred by the charge;
issue of debentures" means a group of debentures, or an amount of debenture stock, secured by the same charge; and
series of debentures" means a group of debentures each containing or giving by reference to another instrument a charge to the benefit of which the holders of debentures of the series are entitled pari passu.

(2) References in this Part to the creation of a charge included the variation of a charge which is not registrable so as to include property by virtue of which it becomes registrable.

The provisions of section 414 (construction of references to date of creation of charge) apply in such a case with any necessary modifications.

(3) References in this Part to the date of acquisition of property by a company are—
(a) in England and Wales, to the date on which the acquisition is completed, and
(b) in Scotland, to the date on which the transaction is settled.

(4) In the application of this Part to a floating charge created under the law of Scotland, references to crystallisation shall be construed as references to the attachment of the charge.

(5) References in this Part to the beginning of insolvency proceedings are to—
(a) the presentation of a petition on which an administration order or winding-up order is made, or
(b) the passing of a resolution for voluntary winding up.

Index of defined expressions

420. The following Table shows the provisions of this Part defining or otherwise explaining expressions used in this Part (other than expressions used only in the same section)—


charge
sections 395(2) and 396(6)


charge requiring registration
section 396


chargee
section 419(1)





complete and accurate (in relation to registered particulars)
section 415(4)


creation of charge
section 419(2)


crystallisation (in relation to Scottish floating charge)
section 419(4)


date of acquisition (of property by a company)
section 419(3)


date of creation of charge
section 414


further particulars
section 401


insolvency proceedings, beginning of
section 419(5)


issue of debentures
section 419(1)


memorandum of charge ceasing to affect company's property
section 403


prescribed particulars
section 415(1) and (2)


property
section 395(2)


registered particulars
section 415(3)


registrar and registration in relation to a charge
section 395(4)


relevant event
section 399(2)


series of debentures
section 419(1).".'.—[Mr. Redwood]

New Clause 32

CHARGES ON PROPERTY OF OVERSEAS COMPANY

'. The provisions set out in Schedule (Charges on property of oversea company) are inserted in Part XXIII of the Companies Act 1985 (oversea companies), as a Chapter III (registration of charges).'.—[Mr. Redwood.]

Brought up, read the First and Second time, and added to the Bill.

MR. DEPUTY SPEAKER then proceeded to put forthwith the Question on amendments, moved by a member of the Government, of which notice had been given, to that part of the Bill to be concluded at ten minutes to Ten o'clock.

Amendment made: No. 83, in page 86, line 26, leave out Clauses 89 to 98.—[Mr. Redwood.]

Schedule 16

AMENDMENTS CONSEQUENTIAL TO PART IV

Amendments made: No. 84, in page 267, line 26, leave out from beginning to end of line 31.

No. 85, in page 267, line 41, column 1, leave out '404(3)' and insert '408(3)'.

No. 86, in page 267, line 43, column 2, leave out
'each issue of debentures of a series'
and insert
'taking up of issue of debentures'.

No. 87, in page 268, line 1, column 1, leave out '405(4)' and insert '409(4)'.

No. 88, in page 268, line 9, column 1, leave out '406(4)' and insert '410(4)'.

No. 89, in page 268, line 13, column 2, leave out `s.406' and insert `s.410'.

No. 90, in page 268, line 14, column 1, leave out '407(4)' and insert '411(4)'.

No. 91, in page 268, line 21, column 1, leave out '408(4)' and insert '412(4)'.

No. 92, in page 268, line 29, column 1, leave out '703C(5)' and insert '703D(5)'.

No. 306, in page 268, line 50, leave out '703C' and insert '703D'.—[Mr. Redwood.]

Amendment made: No. 93—new schedule—

'CHARGES ON PROPERTY OF OVERSEA COMPANIES

The following provisions are inserted in Part XXIII of the Companies Act 1985—

CHAPTER III REGISTRATION OF CHARGES

Introductory provisions

703A.—(1) The provisions of this Chapter have effect for securing the registration in Great Britain of charges on the property of a registered oversea company.

(2) Section 395(2) and (3) (meaning of "charge" and "property") have effect for the purposes of this Chapter.

(3) A "registered oversea company", in relation to England and Wales or Scotland, means an oversea company which has duly delivered documents to the registrar for that part of Great Britain under section 691 and has not subsequently given notice to him under section 696(4) that it has ceased to have an established place of business in that part.

(4) References in this Chapter to the registrar shall be construed in accordance with section 703E below and references to registration, in relation to a charge, are to registration in the register kept by him under this Chapter.

Charges requiring registration

703B.—(l) The charges requiring registration under this Chapter are those which if created by a company registered in Great Britain would require registration under Part XII of this Act.

(2) Whether a charge is one requiring registration under this Chapter shall be determined—
(a) in the case of a charge over property of a company at the date it delivers documents for registration under section 691, as at that date,
(b) in the case of a charge created by a registered oversea company, as at the date the charge is created, and
(c) in the case of a charge over property acquired by a registered oversea company, as at the date of the acquisition.

(3) In the following provisions of this Chapter references to a charge are, unless the context otherwise requires, to a charge requiring registration under this Chapter.

Where a charge not otherwise requiring registration relates to property by virtue of which it requires to be registered and to other property, the references are to the charge so far as it relates to property of the former description.

The register

703C.—(1) The registrar shall keep for each registered oversea company a register, in such form as he thinks fit, of charges on property of the company.

(2) The register shall consist of a file containing with respect to each such charge the particulars and other information delivered to the registrar under or by virtue of the following provisions of this Chapter.

(3) Section 397(3) to (5) (registrar's certificate as to date of delivery of particulars) applies in relation to the delivery of any particulars or other information under this Chapter.

Company's duty to deliver particulars of charges for registration

703D.—(1) If when an oversea company delivers documents for registration under section 691 any of its property is situated in Great Britain and subject to a charge, it is the company's duty at the same time to deliver the prescribed particulars of the charge, in the prescribed form, to the registrar for registration.

(2) Where a registered oversea company—
(a) creates a charge on property situated in Great Britain, or
(b) acquires property which is situated in Great Britain and subject to a charge,

it is the company's duty to deliver the prescribed particulars of the charge, in the prescribed form, to the registrar for registration within 21 days after the date of the charge's creation or, as the case may be, the date of the acquisition.
This subsection does not apply if the property subject to the charge is at the end of that period no longer situated in Great Britain.

(3) Where the preceding subsections do not apply and property of a registered oversea company is for a continuous period of four months situated in Great Britain and subject to

a charge, it is the company's duty before the end of that period to deliver the prescribed particulars of the charge, in the prescribed form, to the registrar for registration.

(4) Particulars of a charge required to be delivered under subsections (1), (2) or (3) may be delivered for registration by any person interested in the charge.

(5) If a company fails to comply with subsection (1), (2) or (3), then, unless particulars of the charge have been delivered for registration by another person, the company and every officer of it who is in default is liable to a fine.

(6) Section 398(2), (4) and (5) (recovery of fees paid in connection with registration, filing of particulars in register and sending of copy of particulars filed and note as to date) apply in relation to particulars delivered under this Chapter.

Registrar to whom particulars, &c. to he delivered

703E.—(1) The particulars required to be delivered by section 703D(1) (charges over property of oversea company becoming registered in a part of Great Britain) shall be delivered to the registrar to whom the documents are delivered under section 691.

(2) The particulars required to be delivered by section 703D(2) or (3) (charges over property of registered oversea company) shall be delivered—
(a) if the company is registered in one part of Great Britain and not in the other, to the registrar for the part in which it is registered, and
(b) if the company is registered in both parts of Great Britain but the property subject to the charge is situated in one part of Great Britain only, to the registrar for that part;
and in any other case the particulars shall be delivered to the registrars for both parts of Great Britain.

(3) Other documents required or authorised by virtue of this Chapter to be delivered to the registrar shall be delivered to the registrar or registrars to whom particulars of the charge to which they relate have been, or ought to have been, delivered.

(4) If a company gives notice under section 696(4) that it has ceased to have an established place of business in either part of Great Britain, charges over property of the company shall cease to be subject to the provisions of this Chapter, as regards registration in that part of Great Britain, as from the date on which notice is so given.

This is without prejudice to rights arising by reason of events occurring before that date.

Effect of failure to deliver particulars, late delivery and effect of errors and omissions

703F.—(1) The following provisions of Part XII—
(a) section 399 (effect of failure to deliver particulars),
(b) section 400 (late delivery of particulars), and
(c) section 402 (effect of errors and omissions in particulars delivered),
apply, with the following modifications, in relation to a charge created by a registered oversea company of which particulars are required to be delivered under this Chapter.

(2) Those provisions do not apply to a charge of which particulars are required to be delivered under section 703D( 1) (charges existing when company delivers documents under section 691).

(3) In relation to a charge of which particulars arc required to be delivered under section 703D(3) (charges registrable by virtue of property being within Great Britain for requisite period), the references to the period of 21 days after the charge's creation shall be construed as references to the period of four months referred to in that subsection.

Delivery of further particulars or memorandum.

703G. Sections 401 and 403 (delivery of further particulars and memorandum of charge ceasing to affect company's property) apply in relation to a charge of which particulars have been delivered under this Chapter

Further provisions with respect to voidness of charges

703H.—(1) The following provisions of Part XII apply in relation to the voidness of a charge by virtue of this Chapter—
(a) section 404 (exclusion of voidness as against unregistered charges),


(b) section 405 (restrictions on cases in which charge is void),
(c) section 406 (effect of exercise of power of sale), and
(d) section 407 (effect of voidness on obligation secured).

(2) In relation to a charge of which particulars are required to be delivered under section 703D(3) (charges registrable by virtue of property being within Great Britain for requisite period), the reference in section 404 to the period of 21 days after the charge's creation shall be construed as references to the period of four months referred to in that subsection.

Additional information to be registered

703I.—(1) Section 408 (particulars of taking up of issue of debentures) applies in relation to a charge of which particulars have been delivered under this Chapter.

(2) Section 409 (notice of appointment of receiver or manager) applies in relation to the appointment of a receiver or manager of property of a registered oversea company.

(3) Regulations under section 410 (notice of crystallisation of floating charge, &c.) may apply in relation to a charge of which particulars have been delivered under this Chapter; but subject to such exceptions, adaptations and modifications as may be specified in the regulations.

Copies of instruments and register to be kept by company.

703J.—(1) Sections 411 and 412 (copies of instruments and register to be kept by company) apply in relation to a registered oversea company and any charge over property of the company situated in Great Britain.

(2) They apply to any charge, whether or not particulars are required to be delivered to the registrar.

(3) In relation to such a company the references to the company's registered office shall be constructed as references to its principal place of business in Great Britain.

Power to make further provision by regulations

703K.—(1) The Secretary of State may by regulations make further provision as to the application of the provisions of this Chapter, or the provisions of Part XII applied by this Chapter, in relation to charges of any description specified in the regulations.

(2) The regulations may apply any provisions of regulations made under section 413 (power to make further provision with respect to application of Part XII) or make any provision which may be made under that section with respect to the application of provisions of Part XII.

Provisions as to situation of property

703L.—(1) The following provisions apply for determining for the purposes of this Chapter whether a vehicle which is the property of an oversea company is situated in Great Britain—
(a) a ship, aircraft or hovercraft shall be regarded as situated in Great Britain if, and only if, it is registered in Great Britain;
(b) any other description of vehicle shall be regarded as situated in Great Britain on a day if, and only if, at any time on that day the management of the vehicle is directed from a place of business of the company in Great Britain;
and for the purposes of this Chapter a vehicle shall not be regarded as situated in one part of Great Britain only.

(2) For the purposes of this Chapter as it applies to a charge on future property, the subject-matter of the charge shall be treated as situated in Great Britain unless it relates exclusively to property of a kind which cannot, after being acquired or coming into existence, be situated in Great Britain; and references to property situated in a part of Great Britain shall be similarly construed.

Other supplementary provisions

703M. The following provisions of Part XII apply for the purposes of this Chapter—(a) section 414 (construction of references to date of creation of charge),
(b) section 415 (prescribed particulars and related expressions),
(c) section 416 (notice of matters disclosed on the register),

(d) section 417 (power of court to dispense with signature),
(e) section 418 (regulations) and
(f) section 419 (minor definitions).

Index of defined expressions

703N. The following Table shows the provisions of this Chapter and Part XII defining or otherwise explaining expressions used in this Chapter (other than expressions used only in the same section)—


charge
sections 703A(2), 703B(3) and 395(2)


charge requiring registration
sections 703B(1) and 396


creation of charge
sections 703M(f) and 419(2)


date of acquisition (of property by a company)
sections 703M(f) and 419(3)


date of creation of charge
sections 703M(a) and 414


property
sections 703A(2) and 395(2)


registered overseas company
section 703A(3)


registrar and registration in relation to a charge
sections 703A(4) and 703E.


situated in Great Britain



in relation to vehicles
section 703L(1)


in relation to future property
section703L(2)".'.—[Mr. Redwood.]

New Clause 33

EFFECTING OF INSURANCE FOR OFFICERS AND AUDITORS OF COMPANY

'.—(1) In section 310 of the Companies Act 1985 (provisions exempting officers and auditors from liability), for subsection (3) (permitted provisions) substitute—
(3) This section does not prevent a company—
(a) from purchasing and maintaining for any such officer or auditor insurance against any such liability, or
(b) from indemnifying any such officer or auditor against any liability incurred by him—
(i) in defending any proceedings (whether civil or criminal) in which judgment is given in his favour or he is acquitted, or
(ii) in connection with any application under section 144(3) or (4) (acquisition of shares by innocent nominee) or section 727 (general power to grant relief in case of honest and reasonable conduct) in which relief is granted to him by the court.".

(2) In Part I of Schedule 7 to the Companies Act 1985 (general matters to be dealt with in directors' report), after paragraph 5 insert—

Insurance effected for officers or auditors

5A. Where in the financial year the company has purchased or maintained any such insurance as is mentioned in section 310(3)(a) (insurance of officers or auditors against liabilities in relation to the company), that fact shall be stated in the report.".'.—[Mr. Redwood.]

Brought up, and read the First time.

Mr. Redwood: I beg to move, That the clause be read a second time.

Mr. Deputy Speaker: With this, it will be convenient to take Government amendment No. 257.

Mr. Redwood: There have been problems if companies pay for liability insurance for directors under the provisions of section 310 of the Companies Act. New clause 33 would enable companies to take out insurance against those liabilities for negligence, default or breach of trust on behalf of its officers and auditors, without that insurance being void. It also requires the existence of such insurance to be disclosed in the directors' report. The remainder of the new clause simply tidies up the drafting.
Amendment No. 257 is a consequential amendment to the Building Societies Act 1986. This will enable the provision in that Act that is analogous to section 310 to be amended so as to ensure that companies and building societies continue to be subject to equivalent provisions.
I know that many hon. Members will welcome this change in the law. My hon. Friend the Member for Dorset, North (Mr. Baker) moved a similar amendment in Committee. It will be especially beneficial to non-executive directors, paid only a few thousand pounds a year for their services, but jointly liable in law with their executive colleagues for substantial sums. It may be of some help to the House, which showed considerable enthusiasm for non-executive directors in previous debates.

Mr. Nicholas Baker: I welcome the introduction of this new clause and I am delighted that my hon. Friend the Minister has moved it. I have two small worries, however, which he may want to look at, but perhaps at a later date. The first concerns the problem that, although there is permission for companies to enter into insurance policies under which legal costs of impending proceedings can be paid, this does not appear to be so if somebody loses the case. The new clause says that the cost will be paid if the case is won. Should not one consider the alternative, which is if the case is lost?
Secondly, section 310 of the Companies Act 1985 does not prohibit the relief provision, but renders it void. The drafting of the permission for this kind of insurance that the new clause provides does not take account of it. It is not clear what the position will be in relation to the policies in force. If they were rendered void under section 310, it is not clear whether the new clause brings them to life again. I hope that my hon. Friend will take away these small but significant concerns and see whether some later amendment should be made.

Mr. Hanley: The new clause amends section 310 of the Companies Act 1985 so as to clarify that a company is able to purchase insurance for its officers and auditors against any liability that may be incurred by the company. The effect of section 310 was uncertain and the clarification is most welcome. The amendment, however, does nothing to address auditors' fundamental liability problems. Through the operation of the legal principle of joint and several liability, an auditor is liable to be required to meet the whole of a loss for which he is only partially responsible. Secondly, for larger firms the professional indemnity insurance cover at levels that they would regard as desirable is almost impossible to secure at any price. Measures to limit the liability of auditors are therefore extremely necessary. I have raised this issue in new clause 50, which we shall reach later in our proceedings. This is an ideal opportunity to raise the matter, however, because it is linked to new clause 33.
In 1986, a group known as the Heads of the Profession saw the then Secretary of State for Trade and Industry, my right hon. Friend the Member for Southend, West (Mr. Channon). The delegation met representatives of the DTI and of the Lord Chancellor's Department. The result was that in 1987 and 1988 the Government appointed a series of fact-finding studies into the liability problems of various professions, including the auditors. The report on the auditing profession is believed to have been in the

Department's hands at least since May. Unfortunately, it has not yet been published and the Department has made no statement on it.
Members of the Standing Committee that considered the Bill will remember that in June the then Minister with responsibilities for these matters, my hon. Friend the Member for Warwickshire, North (Mr. Maude), issued a consultation paper on one of the proposals set out in the study team's report. That proposal I have reproduced as new clause 50. In essence, it allows the shareholders of a company to fix a reasonable limit to the auditor's liability to the company. This is not a solution to the problem but it would be a step in the right direction. The Government have not taken up the proposal in their consultation paper and have made no statement on the results of their consultations.
It would be most helpful, therefore, if my hon. Friend the Minister could provide some information about the Government's actions in respect of liability problems of the auditors' profession and of the many other professions that participated in the consultation process to state their great difficulties. The problems were aired in a debate in another place at some length. I shall be grateful if my hon. Friend will explain the timescale for the results of the consultation process, which was set in place when the Bill was being considered in Committee. Many of us have been surprised that there is no reference to the matter being brought before the House on Report.

Mr. Redwood: I have taken some quick advice on the two issues raised by my hon. Friend the Member for Dorset, North (Mr. Baker). The new clause is as neutral as possible in respect of existing policies. The position would have to be determined in accordance with existing law. My hon. Friend will know that it is a moot point whether existing policies are valid under that law. My hon. Friend asks why there should not be protection if the case is lost. In that event, the director would have been found liable in respect of one of the points set out in section 310. I think that it would be inappropriate that the company should have to pay his costs.
I can tell my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) that the Likierman report should be published soon, which I think that he will welcome. I cannot offer him any joy in respect of new clause 50 and the arguments that he is advancing in this debate. I believe that auditors have to be held liable, that auditors owe a duty and there has to be a fair trial in the courts if there is any potential negligence. The sums involved can be large but only because the amounts that may be lost by relying on inaccurate accounts can also be large. Any limitation on auditor's liability would inevitably mean that in some instances people who lost money in that way through no fault of their own would not be able to recover their losses in full. The onus must be on those who propose a change in the law to demonstrate that such a change would be in the overall public interest. I do not believe that that has been established.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 34

COMPANY CONTRACIS AND EXECUTION OF DOCUMENTS BY COMPANIES

'.—(1) In Chapter III of Part I of the Companies Act 1985


(a company's capacity; the formalities of carrying on business), for section 36 (form of company contracts) substitute—

Company contracts: England and Wales.

36. Under the law of England and Wales a contract may be made—
(a) by a company, by writing under its common seal, or
(b) on behalf of a company, by any person acting under its authority, express or implied;
and any formalities required by law in the case of a contract made by an individual also apply, unless a contrary intention appears, to a contract made by or on behalf of a company.".

(2) After that section insert—

Execution of documents England and Wales.

36A.—(1) Under the law of England and Wales the following provisions have effect with respect to the execution of documents by a company.

(2) A document is executed by a company by the affixing of its common seal.

(3) A company need not have a common seal, however, and the following subsections apply whether it does or not.

(4) A document signed by a director and the secretary of a company, or by two directors of a company, and expressed (in whatever form of words) to be executed by the company has the same effect as if executed under the common seal of the company.

(5) A document executed by a company which makes it clear on its face that it is intended by the person or persons making it to be a deed has effect, upon delivery, as a deed; and it shall be presumed, unless a contrary intention is proved, to be delivered upon its being so executed.

(6) In favour of a purchaser a document shall be deemed to have been duly executed by a company if it purports to be signed by a director and the secretary of the company, or by two directors of the company, and, where it makes it clear on its face that it is intended by the person or persons making it to be a deed, to have been delivered upon its being executed.

A "purchaser" means a purchaser in good faith for valuable consideration and includes a lessee, mortgagee or other person who for valuable consideration acquires an interest in property.".

(3) After the section inserted by subsection (2) insert—

Execution of documents: Scotland

36B.—(1) Under the law of Scotland the following provisions have effect with respect to the execution of documents by a company.

(2) A document—
(a) is signed by a company if it is signed on its behalf by a director, or by the secretary, of the company or by a person authorised to sign the document on its behalf, and
(b) is subscribed by a company if it is subscribed on its behalf by being signed in accordance with the provisions of paragraph (a) at the end of the last page.

(3) A document shall be presumed, unless the contrary is shown, to have been subscribed by a company in accordance with subsection (2) if—
(a) it bears to have been subscribed on behalf of the company by a director, or by the secretary, of the company or by a person bearing to have been authorised to subscribe the document on its behalf; and
(b) it bears—
(i) to have been signed by a person as a witness of the subscription of the director, secretary or other person subscribing on behalf of the company; or
(ii) (if the subscription is not so witnessed) to have been sealed with the common seal of the company.

(4) A presumption under subsection (3) as to subscription of a document does not include a presumption—
(a) that a person bearing to subscribe the document as a director or the secretary of the company was such director or secretary; or
(b) that a person subscribing the document on behalf of the company bearing to have been authorised to do so was authorised to do so.

(5) Notwithstanding subsection (3)(b)(ii), a company need not have a common seal.

(6) Any reference in any enactment (including an enactment contained in a subordinate instrument) to a probative document shall, in relation to a document executed by a company after the commencement of section (Company contracts and execution of documents by companies) of the Companies Act 1989, be construed as a reference to a document which is presumed under subsection (3) above to be subscribed by the company.

(7) Subsections (1) to (4) above do not apply where an enactment (including an enactment contained in a subordinate instrument) provides otherwise.".

(4) After the section inserted by subsection (3) insert—

Pre-incorporation contracts, deeds and obligations

36C.—(1) A contract which purports to be made by or on behalf of a company at a time when the company has not been formed has effect, subject to any agreement to the contrary, as one made with the person purporting to act for the company or as agent for it, and he is personally liable on the contract accordingly.

(2) Subsection (1) applies—
(a) to the making of a deed under the law of England and Wales, and
(b) to the undertaking of an obligation under the law of Scotland, as it applies to the making of a contract.".

(5) In Schedule 22 of the Companies Act 1985 (provisions applying to unregistered companies), at the appropriate place insert—


"Section 36
Company contracts.
Subject to section 718(3).


Sections 36A and 36B
Execution of documents.
Subject to section 718(3).


Section 36C
Pre-incorporation contracts, deeds and obligations.
Subject to section 718(3).".

(6) The Secretary of State may make provision by regulations applying sections 36 to 36C of the Companies Act 1985 (company contracts; execution of documents; pre-incorporation contracts, deeds and obligations) to companies incorporated outside Great Britain, subject to such exceptions, adaptations or modifications as may be specified in the regulations.

Regulations under this subsection shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(7) Schedule (Company contracts, seals &amp;c.: further provisions) contains further minor and consequential amendments relating to company contracts, the execution of documents by companies and related matters.'.—[Mr. Redwood.]

Brought up, and read the First time.

Mr. Redwood: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 123 and 151.

10 pm

Mr. Redwood: The present clause permits companies to dispense with the requirement of having a company seal and makes alternative provision for executing documents. The revised provisions make the following changes to the Companies Act. First, the new clause incorporates reforms proposed by the Scottish Law Commission on the


execution of documents by companies under Scottish Law. Secondly, it takes up proposals suggested in another place that to execute documents other than by sealing, two directors or a director and the secretary should be permitted to sign instead of just a director and the secretary as first proposed. Thirdly, it clarifies and improves the proposals in the present clause 123 in respect of companies executing documents in England and Wales. Fourthly, it makes provisions with respect to the execution of documents by companies incorporated outside Great Britain.
In all those changes, we are grateful for the comments of several professional bodies in both Scotland and England. I should add that, in respect of Scotland, it had originally been intended that the provisions would be included in a separate private Member's Bill backed by the Scottish Law Commission on the Law of Writings. Unfortunately, that Bill failed to gain a Second Reading and we are therefore pleased, through the Bill, to pick up those provisions affecting companies. I hope that the House will welcome that.

Mr. Nicholas Baker: I welcome the new clause. I have one concern, which I hope my hon. Friend can allay. The new clause provides that companies will be deemed to have delivered deeds when they execute them. Subsection (5) states
A document executed by a company which makes it clear on its face that it is intended by the person or persons making it to be a deed has effect, upon delivery, as a deed; and it shall be presumed, unless a contrary intention is proved, to be delivered upon its being so executed.
In that form, it appears that completion meetings will have to change because, as I understand the clause, a company will not be able to execute a document before a meeting and then send it to that meeting a day or two later to have the date put on it and for it to be brought into effect upon that date.
The subsection would have the effect of making the document come into effect when it is executed—possibly two days before the meeting. That could make life difficult for many commercial transactions. Can my hon. Friend allay that concern?

Mr. Redwood: I wonder whether my hon. Friend would allow me to write to him on that point at my leisure, when I have had time to consider it.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 8

DAMAGES

'.—(1) Section 651 of the Companies Act 1985 (power of court to declare dissolution of company void) is amended as follows.

(2) In subsection (1) omit the word "Where" and insert "Subject to the provision of section 651 A below, where".

(3) After section 651 of the Companies Act 1985, insert new section 651A:

"(1) Any person seeking damages
(a) in respect of personal injuries (including any sum claimed by virtue of section 1(2)(c) of the Law Reform (Miscellaneous Provisions) Act 1934 (funeral expenses)), or
(b) under the Fatal Accidents Act 1976 or the Damages (Scotland) Act 1976,

in consequence of any act or omission of a company which has been dissolved and removed from the Register of Companies shall be entitled at any time within the period permitted by the Statute of Limitations to bring or pursue such action directly against the relevant public or employer (as the case may be) liability insurers of that company who, but for the dissolution of that company, would have been contractually bound to indemnify the company in respect of that action for damages, and such insurers shall have no greater liability to that person than its contractual obligations to indemnify the dissolved company in respect of the action.

(2) This section shall apply to any claim or proceeding that exists at the date of or shall arise after the commencement of this Act.".'.—[Ms. Quin.]

Brought up, and read the First time.

Ms. Quin: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this we shall discuss the following amendments: No. 287, in clause 131, page 141, line 36, leave out from 'time' to 'but' in line 37.

No. 288, in clause 131, page 142, line 1, leave out from beginning to `do' and insert—

'(4) An application may be made under section 651(5) of the Companies Act 1985 as inserted by subsection (3) above (proceedings for damages for personal injury, &c.) in relation to a company dissolved before the commencement of this section notwithstanding that the time within which the dissolution might formerly have been declared void under that section had expired before commencement.

But no such application shall be made in relation to a company dissolved more than twenty years before the commencement of this section.

(5) Except as provided by subsection (4), the amendments made by this section.'.

No. 283, in clause 131, page 142, line 2, leave out 'two' and insert 'twenty'.

Ms. Quin: The amendments in the name of the hon. Member for Dorset, North (Mr. Baker) are very much in line with our amendment No. 283. The issues raised by the new clause and the amendment were originally raised in Committee. We do not make any apology for raising them again on Report because they are important matters that were not satisfactorily resolved in Committee. They affect many individuals who are not only experiencing severe health problems, but find themselves in financial difficulties.
The new clause and the amendment are about the difficulty that an individual faces in claiming compensation in cases of personal injury or the contracting of industrial disease when the company for whom the individual worked has been dissolved.
We all know from cases in our constituencies just how prevalent some industrial diseases are, particularly asbestosis, pneumoconiosis, byssinosis, and so on. Those who, like me, represent an industrial constituency know the problems vividly, in particular, the physical and financial difficulties that many of our constituents are facing.
Besides ourselves, many organisations are worried about the problems that the law creates, making it so difficult for people to claim compensation, particularly when they contract diseases several years after leaving the employment of a certain employer.
I particularly want to mention the good work done by the citizen action compensation campaign in highlighting the issue. That has been rightly active in contacting


members of the Committee and many other hon. Members on both sides of the House who are concerned with the issue.
The case that brought the problem to the fore is that of Bradley v. Eagle Star Insurance Company which dates from this year where it was decided that the claimant could not bring a claim against her past employers' insurance company for injuries that she alleged she had received while at work. Mrs. Bradley had contracted the respiratory disease byssinosis because of the work that she had done over several years in the card room of a Bolton cotton mill, the Dart mill.
In 1984 she brought a claim against the Eagle Star Insurance Company because her employers had gone out of business almost 10 years before. However, she could not re-register the company under the present provisions because of the two-year time limit.
Mr. John Pickering, Mrs. Bradley's solicitor, described her position as a clear injustice which was evident to any man in the street. The victim exists, the insurance company exists and the right to seek compensation for the injury has been paid for. Despite that, Mrs. Bradley was unable to obtain justice or compensation.
There is also the case of Norman Burden who worked for many years as a docker on the Newcastle quayside unloading bags of asbestos, as a result of which he contracted asbestosis. Because of the same legal difficulty, his family is left without compensation.
New clause 8 represents the optimum position. It is what we would ideally like to achieve if the Government were prepared to accept our new clause, simply because it provides for three things which do not exist at present.
The new clause would allow claimants to claim directly against the insurance company in the event that a former employee's company had been dissolved. That is important because it would overcome the problem of having to re-register the company for the purpose of making a claim against the insurer, which is the case at present and which can be a costly process—up to £400 for each re-registration.
Companies must be continually re-registered, depending on the number of claims that claimants want to make against that particular company's insurers. Some trade unions find it expensive to cope with the cost of the re-registration of companies. For example, the General and Municipal Workers Union has to re-register the Upper Clyde Shipbuilders at a cost of £3,000 or more a year. That is expensive, and if the law were changed it would be an unnecessary procedure.
The new clause also raises the issue of retrospectivity. We wish the period during which a claim can be made against an insurer to be extended from two years to 20 years. As the Bill stands, a claim can be retrospective for only two years. We feel that, especially as so many industrial diseases take a long time to manifest themselves, an alteration to 20 years would be an important step. We also wish the period to be unlimited in the future, which is why the new clause refers to the statute of limitations rather than to a 20-year period.
We hope that the Minister will respond positively. In Committee, his predecessor seemed to feel that our demands were excessive and that we should show some sympathy for the insurance companies. We were pleased to note, however, that certain Conservative Members took a rather different view, including the hon. Member for

Dorset, North (Mr. Baker), although we were disappointed that that independent view was not reflected in a vote. We hope that that will not happen again.
We do not feel that the concern felt by insurers about the new clause and amendment are justified. They wrote to members of the Committee, and one point raised in Committee was that insurers, when working out the cost of their premiums, take into account that a number of companies will go into liquidation. We do not think that that complaint is justifiable, particularly as before the Bradley v. Eagle Star ruling the legal position was not really clear, and it would therefore have been very unwise for insurance companies to make such a calculation. We feel that, when premiums have been paid and claims cannot be made because of the existing legislation, the insurance companies are benefiting from a windfall.
The insurers also say that it is very unfair for them to be held liable for diseases that may manifest themselves in the future, and could not be foreseen by the industries in question. Insurance companies, however, know that that is the position—industry cannot possibly be aware of future scientific discoveries, for example—and they must deal with their customers on the basis of present knowledge.

Mr. Cousins: Like me, my hon. Friend the Member for Gateshead, East (Ms. Quin) represents a constituency that has had to deal with industrial diseases such as "vibration white finger" and asbestosis, which were being discussed many years ago. Workers and their trade union representatives had to fight the social security and legal systems for many years to establish the identity of those conditions—and others like them—as recognised diseases requiring compensation. Does my hon. Friend feel, as I do, anger that we should be told now after so many years of fighting that those problems could not have been anticipated?

Ms. Quin: I fully accept what my hon. Friend has said, and I hope that the anger that many of us feel about people who are in difficulties because of their past employment will be shared by the Minister and his colleagues.
The insurers have also said that, in certain circumstances, it may be very difficult for companies to track down the files on claimants over a 20-year period. That may be a problem, but it is not sufficient reason not to change the law. It may mean difficulties for certain claimants, but those claimants for whom records exist will be able to obtain justice.
Finally, the insurers are saying that future premiums would become more expensive if the law is changed in the way that we are suggesting, but we are reinforced in our feelings on the subject by the representations made to hon Members by Mr. Robert Kiln, an insurer with more than 50 years' experience who was an insurance adviser to the Department of Trade and Industry. He feels that any such effect would be marginal.
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Another case, the Cartledge case, of which I am sure the Minister is aware, resulted in one occasion in the past where a case of retrospectivity was accepted by both sides of the House. Because of that, we urge the Minister to respond positively to our desire for retrospectivity, at least within the 20-year period, on this occasion. I urge the Minister and his colleagues not simply to accept the views of industry, but to see it from the point of view of the many individuals whose future has been blighted and who are


unable to claim compensation at present. Of course it is true that no amount of money can properly compensate for a permanent loss of good health or a permanent disability, but at least we should try to create the legal conditions under which some of those who have been so badly affected can seek compensation, and by doing so alleviate the problems faced by individuals and their families.

Mr. Redwood: It may help the House to make progress if I intervene at this point in the debate. I have listened carefully to the hon. Lady. I know the strong views expressed by my hon. Friend the Member for Dorset, North (Mr. Baker) in previous debates. I have problems with new clause 8. They are legal difficulties with which I shall not detain the House unduly but which relate to the very point raised by the hon. Lady. Substituting the company's insurer for the company itself as the defendant to an action for damages or personal injuries poses a number of legal difficulties which the Government find difficult to accept.
However, it is much more important for the House to learn not about the legal problems but about what I propose to do about the underlying problem which has been described in Committee. I suggest that the House accepts amendments Nos. 287 and 288 in the name of my hon. Friend the Member for Dorset, North. Clause 131 already extends the two-year period to 20 years, because the Government wanted to tackle that problem. If the House accepts both my hon. Friend's amendments, I hope that it will agree that we have gone a long way towards dealing with some problems which can be quite tragic.
That would require the House to accept the principle of retroaction. When I first examined the case and read the Committee proceedings, that caused me some difficulty. I have been swayed by legal representations that I have seen in which many good lawyers suggest that on this occasion it would be reasonable. If the House is united in wanting retroaction, I shall happily accept my hon. Friend's amendments.

Mr. Nicholas Baker: I am absolutely delighted by what my hon. Friend has just said. I moved the amendments in Committee because it seemed to me that there was an injustice. The hon. Member for Gateshead, East (Ms.

Quin) described the problem. She is more familiar with it than I am as she has more constituents affected by industrial diseases. It is clearly an injustice that people should be prevented from claiming compensation simply because a company has been dissolved. As a lawyer, I, too, was concerned about the retrospective element but medical science has advanced so much, we know so much more about industrial disease and we know that they take longer to appear. To that extent, one could argue that this is not a retrospective piece of legislation. It is recognising that there is a wrong and I am delighted that we are doing something about it.
Amendment No. 288 provides for claims to be made for up to 20 years against companies that have been dissolved. I have difficulties with direct remedies against insurers and in making the time unlimited. I think that 20 years should be sufficient.
This is a great step forward for people who have suffered industrial injuries, and I am delighted with the comments made by my hon. Friend the Minister. I hope that the House will join me in supporting the amendment.

Ms. Quin: I should like to welcome the comments that the Minister made. Obviously, we still favour new clause 8, but the acceptance of the 20-year period and retroactivity is a considerable victory for those who are concerned about the many cases of injustice that have occurred.
There was some confusion in Committee when we debated the amendment. The Minister's predecessor believed that the Bill's provisions would deal with the majority of cases. We subsequently realised that the Bradley case and others would not be covered by clause 131, but they will now be covered by the new formula that the Minister has accepted.

Mr. Redwood: I confirm that what my predecessor said was right. The amendments make small but important improvements to the original good suggestion in the clause.

Ms. Quin: I do not want to introduce dissent into what appears to be agreement. Mrs. Bradley's case, and others, will be dealt with effectively by the amendments, the principle of which has been accepted. I welcome that, and we will therefore not press new clause 8 to a Division. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 9

EMPLOYEES' RIGHTS TO INFORMATION

'The following sections are inserted in Part XI of the Companies Act 1985:

365A—(1) The directors of every company to which this section applies shall communicate to each person in the company's employment at the end of its financial year general but explicit information as to the performance, structure, activities and financial year general but explicit information as to the performance, structure, activities, financial position, employment position, investment prospects and plans of the company during that year.

(2) This section and section 365B apply to every public limited company and every private company which is a subsidiary or a parent company of a public limited company if either the company or the group of companies to which it belongs have not less than 200 employees at the end of the financial year in respect of which information under this section is to be supplied or at the time at which the consultation required by section 365B is to take place as the case may be.

(3) If at the end of the financial year the company is a parent company or a subsidiary company the information referred to in subsection (1) shall be provided in respect of the group of companies of which it is a member and in respect of the company itself.

(4) The information required to be provided by this section shall be delivered in writing to each employee no later than the end of the period applicable to the company under section 244 (period allowed for laying and delivering accounts and reports).

(5) If the requirements of this section are not complied with before the end of the period referred to in subsection (4) every person who immediately before the end of that period was a director of the company is guilty of an offence and liable to a fine and for continued contravention to a daily default fine.

(6) It is a defence for a person charged with such an offence to prove that he took all reasonable steps for securing that those requirements would be complied with before the end of that period.'.—[Mr. John Garrett.]

Brought up, and read the First time.

Mr. John Garrett: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this, it will be convenient to discuss new clause 10—Employees' right to consultation—

'The following sections are inserted in Part XI of the Companies Act 1985:

365B—(1) Subject to subsection (5) the directors of every company to which this section applies shall communicate in writing to the representatives of its employees precise information of the kind laid down in subsection (2) as to any proposed decision by the board of the company or, in so far as they are aware of it, of its holding company as to the matters specified in subsection (3).

(2) The information required to be communicated by subsection (1) is that which will reveal to the employees' representatives the grounds for the proposed decision, its legal, economic and social consequences for the employees concerned and the measures planned in respect of those employees.

(3) The obligation in subsection (1) shall apply to any proposed decision liable to have serious consequences for the interests of a significant number of employees of the company or of other companies in the group of which it is a member and in particular proposed decisions relating to the closure or transfer of the whole or a substantial part of the company or group's undertaking, substantial restrictions or modifications of the activities of that undertaking, major changes in working practice or production methods, the introduction, cessation or variation of co-operation or structural links with other undertakings, companies or businesses and measures relating to the health and safety of employees of the company or group.

(4) The information to be provided under subsection (1) shall be supplied not less than thirty days before it is proposed

to make the decision in question and before that decision is made the directors shall formally consider any representations submitted by the employees' representatives.

(5) Information, the disclosure of which could substantially damage the interests of the company or group of companies, is not subject to the requirement of disclosure in subsection (1) but formal notification of the fact that a decision may be made to which subsection (3) applies must be served on the employees' representative and full information must be disclosed to the industrial tribunal if an application is lodged by the employees' representatives under subsection (6) for a decision as to whether the information falls within this subsection.

(6) The employees' representative may apply to an Industrial Tribunal for a ruling that a decision is proposed to which this section applies or that information as to which a notification under subsection (5) has been received is not such that its disclosures would damage the interests of the company or group of companies.

(7) Any application made under subsection (6) shall be made by the employee's representative within seven days of receiving notice under subsection (5) or of receiving information leading him to believe that a proposed decision is likely. Such application shall be determined by the Tribunal within fourteen days of the application and there shall be no appeal against its decision. The Tribunal may dismiss the application or make such order as it thinks fit for the disclosure of information and the consultation of the employee's representative under this section. The Tribunal shall not disclose to the employees' representative or any other person the information it has received which the company claims is subject to subsection (5) unless the application of the employees' representative is upheld as regards that information.

(8) During the period from the submission of art application under subsection (7) to its determination by the Industrial Tribunal no steps shall be taken by the company to make or execute the proposed decision.'.

Mr. Garrett: I am pleased to see an outbreak of harmony, which was the rule in Committee, with the Government and the Opposition arriving at a much better Bill as a result of discussing the issues. I hope that that will be true in relation to new clauses 9 and 10.
The new clauses embody proposals for an European Community directive on procedures for informing and consulting employees—the Vredeling directive, which was last discussed at the EC's labour and social affairs council in 1986 and is due to be discussed again this year.
The EC charter of fundamental social rights produced in May this year, and due to be discussed at the summit in December, includes the main principles of the new clauses, and it is right that the House should have the opportunity to consider them again.
The charter foresees a particular need for rights of information and consultation to be extended to workers where technological change has far-reaching implications for the work force, where restructuring or mergers have an effect on employment or where workers from other member states are particularly affected by their employers' policies.
In nine of the 12 member states, works councils representing employees have to be kept informed by management about important developments. Unfortunately, the United Kingdom is one of the three states where no such rights exist.
The new clauses are self-explanatory. They differ from the Vredeling directive in that they refer to a company or group of companies having not fewer than 200 employees. The original Vredeling draft referred to 100 employees, but after a vote in the European Parliament the figure was


raised to 1,000 employees. We see no reason why medium-sized companies should not be covered by these provisions.
We are aware—who is not?—that the Prime Minister is resolutely opposed to the provisions of the proposed social charter. I understand that the Department of Employment this week issued a document opposing any legislation on worker participation. Our view is that consultation with employees along the lines proposed in our new clause will eventually be enacted and enforced.
The requirement is modest—that a company should explain its performance and financial and employment prospects to its employees once a year and discuss its plans with its employees. New clause 10 proposes that companies shall consult employees' representatives on decisions that are likely to have serious consequences for the interests of a significant number of employees in respect of such matters as closures, transfers, changes in production methods and health and safety at work. Refusal to provide such information on the grounds of potential harm to the interests of a company may be referred to a tribunal for adjudication.
We are all aware of the value of freely sharing information with the workers in an enterprise and encouraging participation in its conduct. These new clauses are in the mainstream of European thought, but I am sure that the Government are likely to demonstrate that they are outside it.
Indeed, like so many of our proposals for the improvement of the Bill, the new clauses are in line with good management practice in Britain. They would give momentum to the wider adoption of good practice in relation to consulting employees on the major issues that affect their lives at work. In a British Institute of Management discussion paper which I received today, the results of a survey of company employee paticipation in Britain show the extent to which formal methods exist for participation in our companies. The most common form of paticipation is the briefing meeting at which company policies are explained to employees—very much along the lines of what we propose. Nearly half of all companies have them and 70 per cent. think that they are effective or very effective.
In the Netherlands and France, these provisions have already been enacted. In West Germany, the two-tier board structure provides for them. It is time that we moved in that direction. Although the number is dwindling, too many companies in this country are remote, authoritarian and still treat their employees as chattels. In the great wave of redundancies which took place in 1980 and 1982 and which are beginning to recur, certainly in my constituency, as a result of current levels of interest, thousands of workers were dismissed with minimum notice, little consultation and little sharing of experience between managers and workers. We believe that workers have a right to be consulted and to be involved in the decisions that shape their lives.

Mr. Cousins: My hon. Friend the Member for Norwich, South (Mr. Garrett) has rightly referred to the Prime Minister's attitude to workers' rights. In one moment of enthusiasm she even described this modest proposal, and proposals like it, as "Marxist". It may well be that a few small bonfires are being lit in Highgate tonight, and

Heaven knows, there may be some reason for that. Those of us who recollect the discussions in Standing Committee will recall the reference to Karl Marx of Brent which enlivened our proceedings a little.
The proposals in new clauses 9 and 10 have nothing to do with Marxism. Tonight the Government are being tested. The philosophical position which gives rise to the new clauses goes back not to the Communist manifesto of 1848 but to the papal encyclical "Mater et Magister" of the 1890s. The test is whether the Conservative party is prepared to accept the new clauses and start becoming a proper European Christian Democrat party or to remain stuck in an isolationist, reactionary mould which will ultimately exclude them and their successors from all significant influence in Europe's political affairs.
This is an important matter. The new clauses raise issues which are fundamental to the Government's position in Europe. Every Christian Democrat party in Europe, which in their politics are generally thought of as Right-wing parties, associate themselves with the principle of consulting workers by statute. So far, however, the British Government do not, but today they have the opportunity to reverse their stance and to start engaging in the sensible dialogue that will ultimately be inevitable and necessary, not with us but with their own future political candidate allies, should any be foolish enough to take the conservative party seriously.
10.30 pm
The new clauses advance limited, simple proposals which, if the Government do not accept them tonight, they will have to confront in other forms on other occasions in the near future. The proposals are some way down the track that the Government will have to accept. Would it not be better for the Government, for workers and for the Government's standing in Europe if they moved now, before being pushed into another humiliating retreat and surrender on such a simple and fundamental matter?
It is not simply a case of falling into line with Europe. Steps have already been taken which will inevitably raise the issue of workers' rights in a concrete form throughout British industry. European company statutes have already gone so far as to create the European economic interest group—a curious term for the European company.
The European company is with us. Because of the statutory position of companies and the tradition of social legislation, which is not a matter of controversy between the political Left and the Right in other European countries, the Government will have to accept, if not now, then later, incorporation in company statute of the principles of consulting workers and of workers' rights.
It is even more curious that the Government accepted that what leads them down this track in the Employment Act 1982, which was incorporated in the Companies Act 1985. I refer to the requirement for a company to demonstrate in its annual accounts what it has done about employee involvement. Companies are required to report on four issues, two of which are precisely what new clauses 9 and 10 propose.
It is curious that the Government made a great point of philosophical principle about a company not being required to consult its employees and workers or to give them information about key matters of concern to them, but they are willing to require companies to lodge in their accounts a requirement to consult shareholders about what the company does about informing workers. What


tortured logic is it that makes the Government happy to advocate that a company should talk to its shareholders but not to its workers about what it does about workers' rights?
In 1982, the Government quite voluntarily got into an untenable position. In 1985, they shifted that contradiction from employment legislation to companies legislation. It is entirely logical that we should ask the Government to confront that, and to come up with a sensible reply.
We have heard a lot tonight about compliance. It would be interesting to know what the Government have done to ensure compliance with the provisions on employee involvement which they themselves created in the Companies Act 1985. All that appears to have been done in that respect is to carry out two surveys on a sample basis of what companies were up to. Those surveys demonstrate clearly that there is a declining number of companies—and that is to be welcomed—which fail to carry out the provisions originally in the Employment Act 1982 and now in the Companies Act 1985 on the requirement to report their shareholders about workers' rights. None the less, in the last survey carried out in 1988, of the sample taken, more than 10 per cent. of companies failed completely to carry out any of their requirements under the Companies Act 1985.
If the Government are not prepared to accept new clause 9 and new clause 10 to carry them gently a little further forward towards taking workers seriously, as they will inevitably have to do later, it would be interesting to find out tonight what they propose to do to carry out the proper enforcement of their own legislation requiring companies to report to shareholders on these matters under the Companies Act 1985. We have heard much about compliance and high standards tonight, yet there is not a shred of evidence that any company has had any action taken against it to force it to carry out its duties under the 1985 Act on its responsibilities on employee involvement. That is a shameful state of affairs, which can only reduce still further the credibility of the Government's position on the matter.
It is no wonder that our European partners are suspicious of the Government's intentions in this respect. But for the other sensational matters which have come before the House today, this debate and the Government's position on new clause 9 and new clause 10 might well have been recorded and studied closely elsewhere. I appreciate, of course, that after today's events, this humble matter is unlikely to catch the headlines. None the less, there will be and there are already people—including the partner Governments in Europe and the other Christian Democrat politicians in Europe, whom the government would like to see as their political partners—who will look carefully at the Government's response on this. They will be disappointed if the Government do not respond to new clauses 9 and 10 in the same fashion as the Minister responded to new clause 8.
It is not just a question of bringing about compulsory compliance with matters which will eventually be raised against the Government from European sources, but a matter that the Government themselves should be considering. What was the logic of putting into the Companies Act 1985 the requirement to consult shareholders about employee involvement if the matter was not taken seriously?
There are areas which the Government are prepared to admit are significant enough to warrant companies

studying their relationships with their workers most carefully. One of the most significant of those is training. Training is an issue that the Government have sought to detect in the employee involvement statements which have been delivered as a result of that requirement in the Companies Act 1985. What a sad story the statements tell, and how inadequately companies have reported to their shareholders on such key matters. The truth is that the economy will not be turned around unless workers are consulted and informed and unless they play a pan in taking key decisions in their companies.
We should not imagine that when we refer to workers we mean manual industrial workers. Our work force is increasingly comprised of highly skilled, non-manual workers. Above all the Government should seek to mobilise the energy of those workers in the service of their companies and they should do so other than through shareholding schemes.
Tonight we have said much about accountancy. The turnover of labour in accountancy firms is now running at about 20 per cent. or more. The country is in the grip of a philosophy which advocates advancement through change of job. There is nothing wrong with that, but we should remember that we are approaching a time when the number of workers will decline. It is desperately important to retain skilled workers who can work together on a continuing basis with their colleagues.
All too often, teams of highly skilled, non-manual workers are thrown to the wind. My hon. Friend the Member for Sunderland, North (Mr. Clay) saw the loss of such workers—priceless assets—from Marine Design Consultants based in his constituency. In the past, workers whose experience was of great value not only to their companies, but to the economy, were simply discarded. The Government cannot continue to shirk their obligations in this respect.
We are not talking about the industrial workers of the past, but about highly skilled and motivated non-manual workers who want to be part of a team within their company. I hope that the Government recognise that new clauses 9 and 10 present them with an opportunity to mobilise the energy and integrity of such workers in support of their economic policies. I note that the Leader of the House is present. No doubt he is familiar with the Government's economic policies, although they appear obscure to some of us.

Mr. David Winnick: He probably has his mind on other matters.

Mr. Cousins: That would be entirely forgiveabie. Tonight we have witnessed a sensational example of the difficulties which arise if an enterprise fails to involve its senior workers in achieving its objectives. That failure at worker involvement may come to haunt the Government.
New clauses 9 and 10 pose a simple test of the Government's attitude to the work force and of how they intend to respond to the European social charter. It is most important for the Government to sort out whether they want to be a Christian Democratic Government in the social tradition of Europe or whether they wish to remain an isolationist, localised Government obsessed with their own ideas. Tonight, above all nights, we have seen them in that light.
I hope that the Government will accept the new clauses.

The Secretary of State for Trade and Industry (Mr. Nicholas Ridley): I am delighted to respond to the points made by the hon. Members for Norwich, South (Mr. Garrett) and for Newcastle upon Tyne, Central (Mr. Cousins).
The new clauses do different things. New clause 9 gives employers the duty to make an annual report to their employees. I agree that it is good practice to do so. Indeed, all companies have to publish a report of some sort—[Interruption.]Yes, they do—an annual report, and in the main, they have to cover many of the issues referred to here. I should have thought that it would be eminently sensible to cover all the matters which are relevant to shareholders, customers and workers, and to ensure that copies of the report are made available to employees. That seems an excellent example of the best sort of industrial practice.
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The difference between us is whether it is right to turn from good practice to trying to impose a requirement of that sort by statute. The hon. Member for Newcastle upon Tyne, Central asserted that there is a great ideological dispute between us—between Marxism and liberal Tory economics, but I very much doubt that. Throughout these highly successful 10 years of industrial regeneration, we have sought to put minimum burdens on industry, whereas the hon. Gentleman is always hankering for controls, regulation and statutes.
New clause 10 goes much further and requires employers to give 30 days' notice of decisions which might have serious effects such as closure; transfer; changes in the activity of the company, its working practices or production methods; mergers; takeovers; and health and safety matters. If it so happens that a company believes that the decisions that it has to make will be of a sensitive nature, it can apply to the industrial tribunal on the grounds that it might do substantial damage to the company if these were to become public. The company must then await the verdict of the industrial tribunal before approaching a decision.
New clause 10 is a far more serious and inhibiting provision than new clause 9. It would mean considerable delay before decisions could be taken. The judgment of what could be a sensitive decision which could do great damage—not only to that company, but perhaps to other companies and to the whole operation of the market in buying and selling those industrial units—would no longer be within the jurisdiction of the directors but would lie with the industrial tribunal. That in itself is an inhibition which would place a great disadvantage on our boards of directors. Furthermore, the delay inherent in these procedures would have serious consequences for the ability of directors to take decisions in what are sometimes fast-moving situations.
The curious thing about these provisions is that they seem to apply to the company itself and its board of directors. Presumably, if the company is a foreign and not a European company, and the members of the board of directors are not resident here, it would be hard to enforce the provisions. That would give an enormous advantage to foreign rather than European owned companies in this country.

Mr. John Garrett: Why?

Mr. Ridley: Because, as the hon. Gentleman should recognise, the board of directors are not resident in this country——

Mr. Garrett: Where is the advantage?

Mr. Ridley: The advantage is that they would not have this great delay and uncertainty about their ability to take decisions.
An even stronger example is that the real upset and worry that the hon. Member for Newcastle upon Tyne, Central mentioned is for workers whose companies are taken over—not for those in the company doing the taking over. How a company seeking to take over another is supposed to give notice and go to the industrial tribunal about its intentions to take over that other company certainly beats me.
These proposals do not remotely fit the modern fast-moving industrial world of which the hon. Member for Newcastle upon Tyne, Central spoke. He described the difference between the two sides of the House as being between Marxism and market economics, and then pretended that he understood about the fast-moving industrial changes of today. His contention that his proposals are designed to facilitate those changes does not remotely fit the facts—that in such a world the decision makers must be given the chance to take decisions properly.
An example of the sort of inhibitions that new clause 10 might cause was to be seen in an action brought by the trade unions in the High Court in 1987. The unions claimed that they had not been consulted on the transfer involved in the privatisation of the dockyards, as was required by the Dockyard Services Act 1986, which contains the very provisions the hon. Member for Newcastle upon Tyne, Central seeks in the new clause. They arise under the relevant provisions of the Transfer of Undertakings (Protection of Employment) Regulations, which implemented a European directive negotiated by the Labour Government.
The unions admitted at the hearing that their aim throughout had been to delay privatisation and the High Court found that all reasonable steps had been taken to inform and consult the workers. Mr. Justice Millett said in his judgment:
If there is a lesson to be learned from what has taken place, it is that effective consultations cannot take place with those who do not wish to be consulted".
The Opposition would vest these sometimes genuine and sometimes obstructionist powers in the hands of people who sometimes do not want to be consulted.
There are two defects in the Oppositions's approach. First, they want to enshrine in statute, regulations and controls that which we believe should be left to the judgment and decisions of boards of directors, operating in their own best interests and in the best interests of their workers in a highly competitive economy. All unnecessary regulations will make them less likely to be able to provide the improvements in conditions and pay that the employees rightly deserve and expect.
Secondly, the hon. Member for Dagenham (Mr. Gould)—typically of the Opposition—has waged a war against the shareholder. He is, I suppose, the most extreme example of this syndrome. Yesterday he boasted about his book. It might be interesting for the House if I gave it a little more publicity——

Mr. John Garrett: rose——

Mr. Ridley: I have not finished my sentence. The hon. Member says in his book:
Where there is no substantial public equity stake on which to build, we shall establish voting control without necessarily buying the equity … The golden share already establishes the principle of separating voting rights from the other incidents of equity ownership
He says elsewhere:
Our concern is to provide mechanisms …which provide real control to employees over the enterprise to which they devote their working lives …We also believe that employees should have increasing access to such major decisions as plant closures …and takeovers or mergers".
That is what lies behind the new clause. It is also what lies behind the social charter and the European initiatives that the hon. Gentleman has so prophetically—or perhaps I should say pathetically—advocated.
There is a better book than the one by the hon. Member for Dagenham, and it is free. I shall give a copy to the hon. Member for Norwich, South (Mr. Garrett). It is about the improvement and progress in employee involvement in Britain and the great benefits that have come by leaving such matters to those who practise industrial policy. They have responded and have found many important ways to involve workers in the affairs of their companies. That is why we have seen a great increase in industrial productivity and in the standard of living of people in successful industries. Those things are the result of not adopting Opposition policies.

Mr. John Garrett: It is my pleasant duty to welcome the Secretary of State for Trade and Industry on, I think, his first appearance, at the Dispatch Box in his new role. We can look forward to many hours of entertainment from him and fully expect him to do for British industry what he did for the environment.
The right hon. Gentleman was not present in Committee, but he will know that the Opposition moved many amendments aimed at creating companies which are accountable not only to their employees, as the amendment proposes, but also to shareholders, consumers and potential investors. Far from opposing the shareholder, our amendments have tried to advance the concept of the accountable company. I do not know whether the right hon. Gentleman has sat down or whether he gave way to me.

Madam Deputy Speaker (Miss Betty Boothroyd): My understanding was that the Secretary of State had given way.

Mr. Ridley: I had sat down, but I shall attempt to intervene in the hon. Gentleman's speech if he goes on in that way.

Mr. Winnick: I know that my hon. Friend is a generous person. He should perhaps try not to be too harsh on the Secretary of State bearing in mind that the right hon. Gentleman has not been appointed to any of the offices discussed earlier. My hon. Friend should have some sympathy for the Secretary of State.

Mr. Garrett: The right hon. Gentleman needs no sympathy from me. He will get that from his own party as he deals with these important matters in the future.
The Minister's answer to the proposals in our new clause is unsatisfactory and I invite my right hon. and hon. Friends to join me in the Division Lobby.

Question put,that the clause be read a Second time:—
The House deveded: Ayes 39, Noes 137.

Division No. 356]
[10.58 pm


AYES


Allen, Graham
Leighton, Ron


Anderson, Donald
Livsey, Richard


Banks, Tony (Newham NW)
Madden, Max


Barnes, Harry (Derbyshire NE)
Meale, Alan


Battle, John
Michael, Alun


Bennett, A. F. (D'nt'n &amp; R'dish)
Michie, Bill (Sheffield Heeley)


Bermingham, Gerald
Nellist, Dave


Buchan, Norman
Patchett, Terry


Clay, Bob
Powell, Ray (Ogmore)


Cousins, Jim
Quin, Ms Joyce


Cryer, Bob
Ross, Ernie (Dundee W)


Dewar, Donald
Skinner, Dennis


Dixon, Don
Steel, Rt Hon David


Dobson, Frank
Wall, Pat


Fields, Terry (L'pool B G'n)
Wareing, Robert N.


Foster, Derek
Welsh, Michael (Doncaster N)


Foulkes, George
Winnick, David


Galloway, George
Wise, Mrs Audrey


Garrett, John (Norwich South)



Haynes, Frank
Tellers for the Ayes:


Hughes, John (Coventry NE)
Mrs. Llin Golding and


Jones, Martyn (Clwyd S W)
Mr. Ken Eastham.




NOES


Alexander, Richard
Freeman, Roger


Amess, David
French, Douglas


Amos, Alan
Gale, Roger


Arbuthnot, James
Garel-Jones, Tristan


Arnold, Jacques (Gravesham)
Gill, Christopher


Atkinson, David
Glyn, Dr Alan


Baker, Rt Hon K. (Mole Valley)
Goodlad, Alastair


Baker, Nicholas (Dorset N)
Goodson-Wickes, Dr Charles


Bennett, Nicholas (Pembroke)
Gorman, Mrs Teresa


Benyon, W.
Greenway, Harry (Ealing N)


Boswell, Tim
Greenway, John (Ryedale)


Bowden, A (Brighton K'pto'n)
Gregory, Conal


Bowis, John
Griffiths, Peter (Portsmouth N)


Brazier, Julian
Hague, William


Brooke, Rt Hon Peter
Hamilton, Hon Archie (Epsom)


Brown, Michael (Brigg &amp; Cl't's)
Hamilton, Neil (Tatton)


Browne, John (Winchester)
Hanley, Jeremy


Buck, Sir Antony
Hargreaves, Ken (Hyndburn)


Burns, Simon
Harris, David


Burt, Alistair
Hayward, Robert


Butterfill, John
Heathcoat-Amory, David


Carlile, Alex (Mont'g)
Howarth, G. (Cannock &amp; B'wd)


Carlisle, John, (Luton N)
Howe, Rt Hon Sir Geoffrey


Carlisle, Kenneth (Lincoln)
Hughes, Robert G. (Harrow W)


Carrington, Matthew
Hunt, Sir John (Ravensbourn)


Carttiss, Michael
Hunter, Andrew


Cash, William
Irvine, Michael


Channon, Rt Hon Paul
Jack, Michael


Chapman, Sydney
Janman, Tim


Chope, Christopher
Johnson Smith, Sir Geoffrey


Clark, Dr Michael (Rochford)
Jones, Gwilym (Cardiff N)


Clark, Sir W. (Croydon S)
Kilfedder, James


Clarke, Rt Hon K. (Rushcliffe)
Kirkhope, Timothy


Conway, Derek
Knapman, Roger


Coombs, Anthony (Wyre F'rest)
Knight, Greg (Derby North)


Cran, James
Knowles, Michael


Davis, David (Boothferry)
Lester, Jim (Broxtowe)


Day, Stephen
Lilley, Peter


Dicks, Terry
Lord, Michael


Dorrell, Stephen
Maclean, David


Dover, Den
McNair-Wilson, Sir Patrick


Dunn, Bob
Malins, Humfrey


Durant, Tony
Mans, Keith


Evennett, David
Martin, David (Portsmouth S)


Fallon, Michael
Maxwell-Hyslop, Robin


Favell, Tony
Mellor, David


Fenner, Dame Peggy
Meyer, Sir Anthony


Fishburn, John Dudley
Mills, lain


Forsyth, Michael (Stirling)
Mitchell, Sir David


Forth, Eric
Morris, M (N'hampton S)


Fox, Sir Marcus
Moss, Malcolm






Moynihan, Hon Colin
Thompson, Patrick (Norwich N)


Neubert, Michael
Thurnham, Peter


Norris, Steve
Townsend, Cyril D. (B'heath)


Oppenheim, Phillip
Twinn, Dr Ian


Paice, James
Waddington, Rt Hon David


Pattie, Rt Hon Sir Geoffrey
Walden, George


Peacock, Mrs Elizabeth
Waller, Gary


Porter, David (Waveney)
Ward, John


Portillo, Michael
Wardle, Charles (Bexhill)


Powell, William (Corby)
Watts, John


Redwood, John
Wheeler, John


Ridley, Rt Hon Nicholas
Widdecombe, Ann


Shepherd, Richard (Aldridge)
Winterton, Nicholas


Smith, Tim (Beaconsfield)
Wood, Timothy


Soames, Hon Nicholas
Young, Sir George (Acton)


Steen, Anthony



Stern, Michael
Tellers for the Noes:


Stradling Thomas, Sir John
Mr. Irvine Patnick and


Taylor, John M (Solihull)
Mr. Tom Sackville.


Thompson, D. (Calder Valley)

Question accordingly negatived.

Mr. Robert Hayward: On a point of order, Madam Deputy Speaker. Could you please clarify, for a relatively new Member, how, under the Companies Bill, we can give full and due consideration to the fact that this evening the Conservative party in Westminster city council dramatically increased its majority in a byelection?

Madam Deputy Speaker: That is a total waste of the time of the House. It has nothing to do with the Bill or with the Chair.

It being after Eleven o'clock,MADAM DEPUTY SPEAKER proceeded, pursuant to the Order this day, to put forthwith the Question, That all new clauses and new schedules relating to part V of the Bill standing in the name of, or moved by, a member of the Government, be added to the Bill

New clause 52

ORDERS IMPOSING RESTRICTIONS ON SHARES

'.—(1) The Secretary of State may by regulation made by statutory instrument make such amendments of the provisions of the Companies Act 1985 relating to orders imposing restrictions on shares as appear to him necessary or expedient—

(a) for enabling orders to be made in a form protecting the rights of third parties;
(b) with respect to the circumstances in which restrictions may be relaxed or removed;
(c) with respect to the making of interim orders by a court.

(2) The provisions referred to in subsection (1) are section 210(5), section 216(1) and (2), section 445 and Part XV of the Companies Act 1985.

(3) The regulations may make different provision for different cases and may contain such transitional and other supplementary and incidental provisions as appear to the Secretary of State to be appropriate.

(4) Regulations under this section shall not be made unless a draft of the regulations has been laid before Parliament and approved by Resolution of each House of Parliament.'.—[Mr. Tim Smith.]

Brought up, read the First and Second time, and added to the Bill.

New clause 49

ISSUE OF REDEEMABLE SHARES

'.—(1) In Part V of the Companies Act 1985 (share capital, its increase, maintenance and reduction). Chapter III (redeemable shares, purchase by a company of its own shares) is amended as follows.

(2) After section 159 (power to issue redeemable shares) insert—

Terms and manner of redemption

159A.—(1) Redeemable shares may not be issued unless the following conditions are satisfied as regards the terms and manner of redemption.

(2) The date on or by which, or dates between which, the shares are to be or may be redeemed must be specified in the company's articles or, if the articles so provide, fixed by the directors, and in the latter case the date or dates must be fixed before the shares are issued.

(3) Any other circumstances in which the shares are to be or may be redeemed must be specified in the company's articles

(4)The amount payable on redemption must be specified in, or determined in accordance with, the company's articles, and in the latter case the articles must not provide for the amount to be determined by reference to any person's discretion or opinion.

(5) Any other terms and conditions of redemption shall be specified in the company's articles.

(6)Nothing in this section shall be construed as requiring a company to provide in its articles for any matter for which provision is made by this Act."

(3) In section 160 (financing, &c. of redemption)—

(a) omit subsection (3) (which is superseded by the new section 159A), and
(b) in subsection (4) (cancellation of shares on redemption) for "redeemed under this section" substitute "redeemed under this Chapter"

(4) In section 162 (power of company to purchase own shares), for subsection (2) (application of provisions relating to redeemable shares) substitute—
(2) Sections 159, 160 and 161 apply to the purchase by a company under this section of its own shares as they apply to the redemption of redeemable shares".".—[Mr. Nicholas Baker.]

Brought up, read the First and Second time, and added to the Bill.

Amendment made:

New Schedule 151

`COMPANY CONTRAUIS, SEALS, &C.: FURTHER PROVISIONS

Execution of deeds abroad

1.—(1) Section 38 of the Companies Act 1985 (execution of deeds abroad) is amended as follows.

(2) In subsection (1) (appointment of attorney to execute deeds), after "A company may" insert "under the law of England and Wales".

(3) For subsection (2) (effect of deed executed by attorney) substitute—
(2) A deed executed by such an attorney on behalf of the company has the same effect as if it were executed under the company's common seal.".

Official seal for use abroad

2.—(1)Section 39 of the Companies Act 1985 (power to have official seal for use abroad) is amended as follows.

(2) In subsection (1), after "A company" insert "which has a common seal" and for "the common seal of the company" substitute "its common seal".

(3) For subsection (2) (effect of sealing with official seal) substitute—
(2) The official seal when duly affixed to a document has the same effect as the company's common seal.".

(4)In subsection (3) (instrument authorising person to affix official seal), after "by writing under its common seal" insert "or, in the case of a company registered in Scotland. subscribed in accordance with section 36B,".

Official seal for share certificates, &c

3.—(1) Section 40 of the Companies Act 1985 (official seal for share certificates, &c.) is amended as follows.

(2) After "A company" insert "which has a common seal" and for "the company's common seal" substitute "its common seal".

(3) At the end add—
The official seal when duly affixed to a document has the same effect as the company's common seal.

Authentication of documents

4. In section 41 of the Companies Act 1985 (authentication of documents), for the words from "may be signed" to the end substitute "is sufficiently authenticated for the purposes of the law of England and Wales by the signature of a director, secretary or other authorised officer of the company.".

Share certificate as evidence of title

5. For section 186 of the Companies Act 1985 (certificate to be evidence of title) substitute—

Certificate to be evidence of title.

186.—(1) A certificate under the common seal of the company (or, in the case of a company registered in Scotland, subscribed in accordance with section 36B) specifying any shares held by a member is—

(a) in England and Wales, prima facie evidence, and
(b) in Scotland, sufficient evidence unless the contrary is shown, of his title to the shares."

Share warrants to bearer

6. For section 188 of the Companies Act 1985 (issue and effect of share warrant to bearer) substitute—

Issue and effect of share warrant to bearer.

188.—(1) A company limited by shares may, if so authorised by its articles, issue with respect to any fully paid shares a warrant (a "share warrant") stating that the bearer of the warrant is entitled to the shares specified in it.

(2)A share warrant issued under the company's common seal (or, in the case of a company registered in Scotland, subscribed in accordance with section 36B) entitles the bearer to the shares specified in it; and the shares may be transferred by delivery of the warrant.

(3)A company which issues a share warrant may, if so authorised by its articles, provide (by coupons or otherwise) for the payment of the future dividends on the shares included in the warrant".

Identification of company on common seal

7. In section 350 of the Companies Act 1985 (identification of company on company seal), for subsection (1) substitute—
(1) A company which has a common seal shall have its name engraved in legible characters on the seal; and if it fails to comply with this subsection it is liable to a fine.".

Floating charges under Scots law

8. In section 462 of the Companies Act 1985 (power of company to create floating charge), for subsections (2) and (3) substitute—
(2) In the case of a company which the Court of Session has jurisdiction to wind up, a floating charge may be created only by a written instrument which is presumed under section 36B to be subscribed by the company.".

9. In section 466(2) of the Companies Act 1985 (execution of instrument altering floating charge)—

(a) at the beginning of the subsection insert "Without prejudice to any enactment or rule of law regarding the execution of documents,";
(b) omit paragraph (a);
(c) at the end of paragraph (b) insert "; or", and
(d) omit paragraph (d) and the word "or" preceding it.

10. In section 53(3) of the Insolvency Act 1986 (execution of instrument appointing receiver), in paragraph (a) for "in accordance with the provisions of section 36 of the Companies Act as if it were a contract" substitute "in accordance with section 36B of the Companies Act 1985".'—[Mr. Redwood.]

MADAM DEPUTY SPEAKER then proceeded to put forthwith the Question on amendments, relating to part V of the Bill, standing in the name of, or moved by a Member of the Government, of which notice had been given, to that part of the Bill to he concluded at Eleven o'clock.

Clause 101

A COMPANY'S OBJECTS AND THE POWER OF DIRECTORS TO BIND IT

Amendments made: No. 94, in page 102, line 48, leave out from 'or to end of line 50 and insert
'anything in the company's memorandum.'

No. 95, in page 103, leave out lines 1 to 8 and insert—

`(2) A member of a company may bring proceedings to restrain the doing of an act which but for subsection (1) would be beyond the company's capacity; but no such proceedings shall lie in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the company.

(3) It remains the duty of the directors to observe any limitations on their powers flowing from the company's memorandum; and action by the directors which but for subsection (1) would be beyond the company's capacity may only be ratified by the company by special resolution.

A resolution ratifying such action shall not affect any liability incurred by the directors or any other person; relief from any such liability must be agreed to separately by special resolution.

(4) The operation of this section is restricted b) section 30B(1) of the Charities Act 1960 and section 105(3) of the Companies Act 1989 in relation to companies which are charities; and section 322A below (invalidity of certain transactions to which directors or their associates are parties) has effect notwithstanding this section.'.

No. 96, in page 103, line 21, at end insert—
`(c) a person shall be presumed to have acted in good faith unless the contrary is proved.'.

No. 97, in page 103, leave out lines 22 to 26 and insert—
'(2A) The references above to limitations on the directors' powers under the company's constitution include limitations deriving—

(a) from a resolution of the company in general meeting or a meeting of any class of shareholders, or
(b) from any agreement between the members of the company or of any class of shareholders.'

No. 98, in page 103, line 29, leave out from `directors;' to end of line 31 and insert
'but no such proceedings shall lie in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the company.

(3A) Nor does that subsection affect any liability incurred by the directors, or any other person, by reason of the directors' exceeding their powers.'.

No. 99, page 103, leave out lines 32 to 41.

No. 100, in page 103, line 41, at end insert—
'(4) The operation of this section is restricted by section 30B(1) of the Charities Act 1960 and section 105(3) of the Companies Act 1989 in relation to companies which are charities; and section 322A below (invalidity of certain transactions to which directors or their associates are parties) has effect notwithstanding this section.'.

No. 101, in page 103, line 43, leave out from 'is' to 'or' in line 44 and insert
'permitted by the company's memorandum'.

No. 102, in page 103, line 46, at end insert—
'(1A) In Schedule 21 to the Companies Act 1985 (effect of registration of companies not formed under that Act), in paragraph 6 (general application of provisions of Act), after sub-paragraph (5) insert—
(6) Where by virtue of sub-paragraph (4) or (5) a company does not have power to alter a provision, it does not have power to ratify acts of the directors in contravention of the provision.".'.—[Mr. Redwood.]

Clause 102

INVALIDITY OF CERTAIN TRANSACTIONS INVOLVING DIRECTORS

Amendments made: No. 103, in page 104, leave out lines 3 to 29 and insert—


'322A.—(1) This section applies where a company enters into a transaction to which the parties include—

(a) director of the company or of its holding company, or
(b) a person connected with such a director or a company with whom such a director is associated, and the board of directors, in connection with the transaction, exceed any limitation on their powers under the company's constitution.

(2) The transaction is voidable at the instance of the company.

(3) Whether or not it is avoided, any such party to the transaction as is mentioned in subsection (1)(a) or (b), and any director of the company who authorised the transaction, is liable—

(a) to account to the company for any gain which he has made directly or indirectly by the transaction, and
(b) to indemnify the company for any loss or damage resulting from the transaction.

(4) Nothing in the above provisions shall be construed as excluding the operation of any other enactment or rule of law by virtue of which the transaction may be called in question or any liability to the company may arise.

(5) The transaction ceases to be voidable if—

(a) restitution of any money or other asset which was the subject-matter of the transaction is no longer possible, or
(b) the company is indemnified for any loss or damage resulting from the transaction, or
(c) rights acquired bona fide for value and without actual notice of the directors' exceeding their powers by a person who is not party to the transaction would be affected by the avoidance, or
(d) the transaction is ratified by the company in general meeting, by ordinary or special resolution or otherwise as the case may require.

(6) A person other than a director of the company is not liable under subsection (3) if he shows that at the time the transaction was entered into he did not know that the directors were exceeding their powers.

(7) This section does not affect the operation of section 35A in relation to any party to the transaction not within subsection (1)(a) or (b).

But where a transaction is voidable by virtue of this section and valid by virtue of that section in favour of such a person, the court may, on the application of that person or of the company, make such order affirming, severing or setting aside the transaction, on such terms, as appear to the court to be just.

(8) In this section "transaction" includes any act; and the reference in subsection (1) to limitations under the company's constitution includes limitations deriving—

(a) from a resolution of the company in general meeting or a meeting of any class of shareholders, or
(b) from any agreement between the members of the company or of any class of shareholders.".'.—[Mr. Redwood.]

Clause 103

STATEMENT OF COMPANY'S OBJECTS

Amendment made: No. 104, in page 104, line 36, leave out from 'formation),' to 'A' in line 46 and insert
`after section 3 (forms of memorandum) insert—

Statement of company's objects: general commercial company

3A. Where the company's memorandum states that the object of the company is to carry on business as a general commercial company—

(a) the object of the company is to carry on any trade or business whatsoever, and
(b) the company has power to do all such things as are incidental or conducive to the carrying on of any trade or business by it.".

(2) In the same Chapter, for section 4 (resolution to alter objects) substitute—

Resolution to alter objects

4.—(1)'.—[Mr.Redwood.]

Clause 104

CHARITABLE COMPANIES

Amendments made: No. 105, in page 105, line 37, leave out from beginning to end of line 12 on page 106 and insert—
'30B.—(1) Section 35 of the Companies Act 1985 (capacity of company not limited by its memorandum), and section 35A of that Act (power of directors to bind company) so far as it relates to acts which but for section 35 would be beyond the capacity of the company, do not apply to the acts of a company which is a charity except in favour of a person who—

(a) gives full consideration in money or money's worth in relation to the act in question, and
(b) does not know that the act is not permitted by the company's memorandum or, as the case may be, is beyond the powers of the directors,
or who does not know at the time the act is done that the company is a charity.

(2) However, where such a company purports to transfer or grant an interest in property, the fact that the act was not permitted by the company's memorandum or, as the case may be, that the directors in connection with the act exceeded any limitation on their powers under the company's constitution, does not affect the title of a person who subsequently acquires the property or any interest in it for full consideration without actual notice of any such circumstances affecting the validity of the company's act.

(3) In any proceedings arising out of subsection (1) the burden of proving—
(a) that a person knew that an act was not permitted by the company's memorandum or was beyond the powers of the directors, or
(b) that a person knew that the company was a charity, lies on the person making that allegation.

(4) Where a company is a charity, the ratification of an act under section 35(3) of the Companies Act 1985, or the ratification of a transaction to which section 322A of that Act applies (invalidity of certain transactions to which directors or their associates are parties), is ineffective without the prior written consent of the Commissioners.'.

No. 106, in page 106, line 22, after 'company,' insert—
 '(cc) in all conveyances purporting to be executed by the company,'.

No. 107, in page 106, line 24, at end insert—
'(1A) In subsection (l)(cc) "conveyance" means any instrument creating, transferring, varying or extinguishing an interest in land.'—[Mr. Redwood.]

Clause 105

CHARITABLE COMPANIES (SCOTLAND)

Amendments made: No. 108, in page 107, line 8, leave out subsections (3) to (5) and insert—
'(3) Section 35 of the Companies Act 1985 (capacity of company not limited by its memorandum), and section 35A of that Act (power of directors to bind company) so far as it relates to acts which but for section 35 would be beyond the capacity of the company, do not apply to the acts of a company which is a charity except in favour of a person who—

(a) gives full consideration in money or money's worth in relation to the act in question,
(b) does not know that the act is not permitted by the company's memorandum or, as the case may be, is beyond the powers of the directors,
or who does not know at the time the act is done that the company is a charity.

(4) However, where such a company purports to transfer or grant an interest in property, the fact that the act was not permitted by the company's memorandum or, as the case may be, that the directors in connection with the act exceeded any limitation on their powers under the company's constitution, does not affect the title of a person who subsequently acquires


the property or any interest in it for full consideration without actual notice of any such circumstances affecting the validity of the company's act.

(5) In any proceedings arising out of subsection (3) the burden of proving—

(a) that a person knew that an act was not permitted by the company's memorandum or was beyond the powers of the directors, or
(b) that a person knew that the company was a charity, lies on the person making that allegation.'.

No. 109, in page 107, line 32, after 'company,' insert—
'(cc) in all conveyances purporting to be executed by the company.'.

No. 110, in page 107, line 33, at end insert—
'(6A) In subsection (6)(cc) "conveyance" means any document for the creation, transfer, variation or extinction of an interest in land.'.

No. 111, in page 115, line 33, leave out from 'section' to end of line 35 and insert
'388A (dormant company exempt from obligation to appoint auditors).'.—[Mr. Redwood.]

Clause 112

APPOINTMENT OF AUDITORS

Amendments made: No. 112, in page 118, line 12, at end insert—

'Dormant company exempt from obligation to appoint auditors

388A.—(1) A company which by virtue of section 250 (dormant companies: exemption from provisions as to audit of accounts) is exempt from the provisions of Part VII relating to the audit of accounts is also exempt from the obligation to appoint auditors.

(2) The following provisions apply if the exemption ceases.

(3) Where section 385 applies (appointment at general meeting at which accounts are laid), the directors may appoint auditors at any time before the next meeting of the company at which accounts are to he laid; and auditors so appointed shall hold office until the conclusion of that meeting.

(4) Where section 385A applies (appointment by private company not obliged to lay accounts), the directors may appoint auditors at any time before—

(a) the end of the period of 28 days beginning with the day on which copies of the company's annual accounts are next sent to members under section 238, or
(b) if notice is given under section 253(2) requiring the laying of the accounts before the company in general meeting, the beginning of that meeting;
and auditors so appointed shall hold office until the end of that period or, as the case may be, the conclusion of that meeting.

(5) If the directors fail to exercise their powers under subsection (3) or (4), the powers may be exercised by the company in general meeting.'.

No. 113, in page 118, line 19, at end insert—

'(3) In section 46(2) of the Banking Act 1987 (duty of auditor of authorised institution to give notice to Bank of

"389A(2)
Officer of company making false, misleading or deceptive statement to auditors.


389A(3)
Subsidiary undertaking or its auditor failing to give information   to   auditors of parent company


389A(4)
Parent company failing to obtain from subsidiary undertaking information for purposes of audit.

'(4) In schedule 22 to the Companies Act 1985 (unregistered companies), in the entry for sections 384 to 393, for "393" substitute "394A".'.

England of certain matters) for "appointed under section 384" substitute "appointed under Chapter V of Part XI"; and in section 46(4) (adaptation of references in relation to Northern Ireland) for "sections 384," substitute "Chapter V of Part XI and sections".'.—[Mr. Redwood.]

Clause 113

RIGHTS OF AUDITORS

Amendments made: No. 114, in page 118, line 20, leave out 'section is' and insert 'sections are'.

No. 115, in page 118, line 22, at end insert—

'Rights to information

389A.—(1) The auditors of a company have right of access at all times to the company's books, accounts and vouchers, and are entitled to require from the company's officers such information and explanations as they think necessary for the performance of their duties as auditors.

(2) An officer of a company commits an offence if he knowingly or recklessly makes to the company's auditors a statement (whether written or oral) which—

(a) conveys or purports to convey any information or explanations which the auditors require, or are entitled to require, as auditors of the company, and
(b) is misleading, false or deceptive in a material particular.

A person guilty of an offence under this subsection is liable to imprisonment or a fine, or both.

(3) A subsidiary undertaking which is a body corporate incorporated in Great Britain, and the auditors of such an undertaking, shall give to the auditors of any parent company of the undertaking such information and explanations as they may reasonably require for the purposes of their duties as auditors of that company.

If a subsidiary undertaking fails to comply with this subsection, the undertaking and every officer of it who is in default is guilty of an offence and liable to a fine; and if an auditor fails without reasonable excuse to comply with this subsection he is guilty of an offence and liable to a fine.

(4) A parent company having a subsidiary undertaking which is not a body corporate incorporated in Great Britain shall, if required by its auditors to do so, take all such steps as are reasonably open to it to obtain from the subsidiary undertaking such information and explanations as they may reasonably require for the purposes of their duties as auditors of that company.

If a parent company fails to comply with this subsection, the company and every officer of it who is in default is guilty of an offence and liable to a fine.

(5) Section 734 (criminal proceedings against unincor-porated bodies) applies to an offence under subsection (3).'.

No. 116, in page 119, line 8, leave out subsection (2).

No. 117, in page 119, line 10, at end insert—
'(2A) In section 734 of the Companies Act 1985 (criminal proceedings against uncorporated bodies), in subsection (1) (offences in relation to which the provisions apply), after "under" insert "section 389A(3) or".

(2B) In Schedule 24 to the Companies Act 1985 (punishment of offences) at the appropriate place insert—


1. On indictment.
2 years or a fine; or both.


2. Summary.
6 months or the statutory maximum; or both.


Summary.
One-fifth of the statutory maximum.


Summary.
One-fifth of the statutory maximum.".'.—[Mr. Redwood.]

Clause 116

STATEMENT BY PERSON CEASING TO HOLD OFFICE AS AUDITOR

Amendments made: No. 118, in page 125, line 43, leave out `Section' and insert
`Sections 733 (liability of individuals for corporate default) and'.

No. 119, in page 126, line 13, at end insert—
'(2A) In section 733 of the Companies Act 1985 (liability of individuals for corporate default), in subsection (1) (offences in relation to which provisions apply) after "216(3)" insert ", 394A(1)".'.

No. 120, in page 126, line 17, at end insert—

Clause 120

SUPPLEMENTARY PROVISIONS AS TO COMPANY RECORDS AND RELATED MATTERS

Amendments made: No. 121, in page 130, line 32, at end insert—
'(7) In Schedule 22 to the Companies Act 1985 (unregistered companies), in the entry for Part XXIV for "sections 706, 708 to 710, 712 and 713" substitute "sections 706 to 710A, 713 and 715A".'.—[Mr. Redwood.]

Clause 122

MEMBERSHIP OF HOLDING COMPANY

Amendment made: No. 122, in page 132, line 29, after `paragraphs' insert `1(1),'.—[Mr. Redwood.]

Clause 123

ABOLITION OF REQUIREMENT TO HAVE COMPANY SEAL

Amendment made: No. 123, in page 132, line 32, leave out clause 123.—[Mr. Redwood.]

Clause 126

ADDITIONAL REQUIREMENTS FOR RECOGNITION: DEFAULT RULES, &amp; C.

Amendment made: No 305, in page 134, line 24, at end insert—
`The order bringing the above amendment into force may make such provision as appears to the Secretary of State appropriate as to the obligations of a person whose interest in a company's shares becomes notifiable by virtue of the amendment coming into force.'.—[Mr. Nelson.]

Clause 129

ANNUAL RETURNS

Amendments made: No. 124, in page 137, line 43, leave out `company's' and insert 'type of company it is and its'.

No. 125, in page 138, line 24, at end insert—
'(1A) The information as to the company's type shall be given by reference to the classification scheme prescribed for the purposes of this section.'.

No. 126, in page 139, line 4, leave out from first 'or to`and' in line 5 and insert
'issued shares of the company at the date to which the return is made up'.

No. 127, in page 139, line 11, leave out from beginning to end of line 13 and insert
'issued shares of that class at the date to which the return is made up.'.

No. 128, in page 139, line 14, leave out from beginning to end of line 35 and insert—
'(4) The return shall contain a list of the names and addresses of every person who—

(a) is a member of the company on the date to which the return is made up, or
(b) has ceased to be a member of the company since the date to which the last return was made up (or, in the case of the first return, since the incorporation of the company);
and if the names are not arranged in alphabetical order the return shall have annexed to it an index sufficient to enable the name of any person in the list to be easily found.

(5) The return shall also state—

(a) the number of shares of each class held by each member of the company at the date to which the return is made up, and
(b) The number of shares of each class transferred since the date to which the last return was made up (or, in the case of the first return, since the incorporation of the company) by each member or person who has ceased to be a member, and the dates of registration of the transfers.'.

No. 129, in page 140, leave out line 28 and insert—
`(1) section 363 (duty of company to make annual returns);".'.

No. 130, in page 140, line 28, at end insert—
'(5) In section 565(6) of the Income and Corporation Taxes Act 1988 (conditions for exemption from provisions relating to sub-contractors in construction industry: compliance with requirements of Companies Act 1985) in paragraph (d) for "sections 363, 364 and 365" substitute "sections 363 to 365".'.—[Mr. Redwood.]

Clause 132

ABOLITION OF DOCTRINE OF DEEMED NOTICE

Amendments made: No. 131, in page 142, line 16, at end insert—
`(a) section 416 of this Act (under which a person taking a charge over a company's property is deemed to have notice of matters disclosed on the companies charges register), or
(b)'.

No. 132, in page 142, line 22, at end insert—

'(2) In Schedule 22 to the Companies Act 1985 (unregistered companies), in the entry for Part XXIV at the appropriate place insert—


'Section 711A
Abolition of doctrine of deemed notice
Subject to section 718(3)".'.—[Mr. Redwood.]

Clause 133

RIGHTS OF INSPECTION AND RELATED MATTERS

Amendments made: No. 133, in page 142, line 45, at end insert—
'(4A) Regulations under this section may make different provision for different classes of case.'.

No. 134, in page 144, line 11, at end insert—
'(11) In Schedule 22 to the Companies Act 1985 (provisions applying to unregistered companies), in the entry relating to Part XXV at the appropriate place insert—

"Section 723A
Rights of inspection and related matters.
To apply only so far as this provision has effect in relation to provisions applying by virtue of the foregoing provisions of this Schedule.".'.—[Mr. Redwood.]

Clause 134

DISCLAIMER OF PROPERTY, RESCISSION OF CONTRACTS, &C.

Amendment made:No. 286, in page 146, line 39, at end insert—
'(5) So much of section 23(3) of the Interpretation Act 1978 as applies section 17(2)(a) of that Act (effect of repeal and re-enactment) to deeds, instruments and documents other than enactments shall not apply in relation to any repeal and re-enactment effected by regulations made under this section.'.—[Mr. Nicholas Baker.]

Schedule 18

MINOR AMENDMENTS OF THE COMPANIES ACT 1985

Amendments made: No. 135, in page 274, line 22, at end insert—

'Correction of cross-reference

0A. In section 131(1) of the Companies Act 1985 (merger relief) for "section 132(4)" substitute "section 132(8)".

This amendment shall be deemed always to have had effect.'.

No. 136, in page 274, line 26, leave out from `directors)' to end of line 27 and insert—
'—

(a) in sub-paragraph (i) for "Christian name and surname" and in sub-paragraph (ii) for "Christian name or surname" substitute "name", and
(b) for sub-paragraph (vii) substitute—"(vii) the date of his birth;".'.

No. 137, in page 274, line 31, leave out '01 and insert `(1)(a)'.

No. 138, in page 275, line 4, leave out `(twice)' and insert
`and "Christian name or surname"'.

No. 139, in page 275, line 6, leave out from beginning to end of line 7 and insert—
(3) Section 289(2)(a) and (b) apply for the purposes of the obligation under subsection (1)(a) of this section to state the name or former name of an individual.".'.

No. 140, in page 275, line 26, at end insert—
'3A.—(l) Section 686 of the Companies Act 1985 (documents to be delivered to registrar on registration of company not formed under companies legislation) is amended as follows.

(2) In subsection (1) (particulars to be delivered to registrar), for paragraph (b) (particulars of directors and managers) substitute—

"(b) a list showing with respect to each director or manager of the company—

(a) in the case of an individual, his name, address, occupation and date of birth,
(b) in the case of a corporation or Scottish firm, its corporate or firm name and registered or principal office,".

(3) After that subsection insert—
(IA) For the purposes of subsection (1)(b)(i) a persons's `name' means his Christian name (or other forename) and surname, except that in the case of a peer, or an individual usually known by a title, the title may be stated instead of his Christian name (or other forename) and surname or in addition to either or both of them.".

3B. In section 691 of the Companies Act 1985 (documents to be delivered to registrar on registration of oversea company), for subsection (2) (particulars of directors and secretary) substitute—

"(2) The list referred to in subsection ( I )(b)(i) shall contain the following particulars with respect to each director—

(a) in the case of an individual—

(i) his name,
(ii) any former name,
(iii) his usual residential address,
(iv) his nationality,
(v) his business occupation (if any),
(vi) if he has no business occupation but holds other directorships, particulars of them, and
(vii) his date of birth;

(b) in the case of a corporation or Scottish firm, its corporate or firm name and registered or principal office.

(3) The list referred to in subsection (1)(b)(i) shall contain the following particulars with respect to the secretary (or, where there are joint secretaries, with respect to each of them)—

(a) in the case of an individual, his name, any former name and his usual residential address;
(b) in the case of a corporation or Scottish firm, its corporate or firm name and registered or principal office.

Where all the partners in a firm are joint secretaries of the company, the name and principal office of the firm may be stated instead of the particulars required by paragraph (a).

(4) In subsections (2)(a) and (3)(a) above—

(a) "name" means a person's Christian name (or other forename) and surname, except that in the case of a peer, or an individual usually known by a title, the title may be stated instead of his Christian name (or other forename) and surname, or in addition to either or both of them; and

(b) the reference to a former name does not include—

(i) in the case of a peer, or an individual normally known by a British title, the name by which he was known previous to the adoption of or succession to a title, or
(ii) in the case of any person, a former name which was changed or disused before he attained the age of 18 years or which has been changed or disused for 20 years or more, or
(iii) in the case of a married woman, the name by which she was known previous to the marriage.".'.

No. 141, in page 275, line 29, after `directors)' insert—`(a)'.

No. 142, in page 275, line 30, at end insert
`; and (b) for the words from "and, in the case" to the end substitute "and his date of birth".'.

No. 143, in page 275, line 33, leave out '3(a)' and insert `3(1)(a)'.

No. 144, in page 275, line 36, leave out '1 and 3' and insert '1(a) and 3(1)(a)'.

No. 145, in page 278, line 46, at end insert—

'Meaning of "officer who is in default"

13A.In section 730 of the Companies Act 1985 (punishment of offences), in subsection (5) (meaning of "officer who is in default"), after "company" (twice) insert "or other body".

Offences committed by partnerships and other unincorporated bodies

13B In section 734 of the Companies Act 1985 (criminal
B.proceedings against unincorporated bodies), at the end add—

"(5) Where such an offence committed by a partnership is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, a partner, he as well as the partnership is guilty of the offence and liable to be proceeded against and punished accordingly.

(6) Where such an offence committed by an unincorporated body (other than a partnership) is proved to have been committed with the consent or connivance


of, or to be attributable to any neglect on the part of, any officer of the body or any member of its governing body, he as well as the body is guilty of the offence and liable to be proceeded against and punished accordingly.".'.

No. 146, in page 279, line 21, column 2, after 'sections' insert `261(2)'.

No. 147, in page 279, leave out line 26 and insert—

'balance sheet and balance sheet sections 261(2), 262(1) and date 742(1)'.

No. 148, in page 280, line 31, column 2, leave out 'section 258' and
 insert 'sections 258 and 742(1)'.

No. 149, in page 280, leave out lines 36 to 38 and insert—


'profit and loss account
sections 261(2), 262(1) and 742(1)'.

No. 150, in page 281, line 3, column 2, leave out 'section 258' and insert 'sections 258 and 742(1)'.—[Mr. Redwood.]

New Clause 12

MERGER REFERENCES

'. In section 76 of the Fair Trading Act 1973 (functions of director in relation to Merger Situation), leave out paragraph (b) and insert—
(b) to recommend to the Secretary of State to make a merger reference to the Commission unless he is satisfied that such arrangements or transactions will not operate against the public interest.".'.—[Mr. John Garrett.]

Brought up, and read the First time.

Mr. John Garrett: I beg to move, That the clause be read a Second time.

Madam Deputy Speaker: With this we shall discuss new clause 11—Merger references—
'. In section 64 of the Fair Trading Act 1973 (merger situation qualifying for investigation) after subsection (2) insert—
(2A) The Secretary of State shall make a merger reference to the Commission unless he is satisfied that the merger situation will not operate against the public interest.".'.

Mr. Garrett: These two new clauses deal with the onus of proof in merger cases. Under the Fair Trading Act 1973, if a proposed merger involves net assets of a value of more than £30 million or a 25 per cent. product market share it is scrutinised by the Director General of Fair Trading, who recommends to the Secretary of State whether the merger should be referred to the Monopolies and Mergers Commission. This new clause accepts these arrangements but establishes new guidelines that a merger shall be referred unless it is clear that it will not operate against the public interest.
According to the Government, mergers are generally a case of market forces successfully at work for the benefit of the economy as a whole. Mergers are good because they are good management driving out bad; because they yield economies of scale; and because the threat of a takeover serves to keep managers on their toes. It is argued from this that on the whole the only reason for a proposed merger to be referred to the Monopolies and Mergers Commission is the possibility of its having anticompetitive, monopolistic implications. This doctrine was first publically announced in 1984 by the right hon.

Member for Chingford (Mr. Tebbit), then the Secretary of State for Trade and Industry, in the so-called Tebbit doctrine.
During the Second Reading debate of the Companies Bill in the House of Lords, the subsequent Secretary of State, Lord Young, stated:
In the vast majority of cases, decisions on mergers should be left to shareholders…It is normally only when a merger threatens the interests of customers by reducing competition that the law should intervene."—[Official Report, House of Lords, 16 January 1989; Vol. 503, c. 7–8.]
We believe that that approach is deficient. Lord Young retained a reserve power to make a reference on wider public interest grounds when, for example, he referred the Kuwait Investment Office shareholding in BP. The practice of retaining golden shares in privatised industries also represents a recognition of public interest issues beyond the promotion of competition. We therefore have ad hoc intervention in the merger process without any coherent public interest criterion.
A survey in February this year by Channel 4's "The Business Programme" showed the incoherence of the Government's policy—the way that it varies from one specific case to another. The survey covered the top 20 financial advisers in the United Kingdom mergers and acquisitions field, and 19 of the 20 experts agreed that the Government's mergers policy was neither consistent nor clear-cut. The survey cited confusion over the referral ofs such as Elders' bid for Scottish and Newcastle, where analysts felt that there was no threat to competition, and the decision not to refer the Nestle takeover of Rowntree in spite of concern over Swiss non-reciprocity.
11.15 pm
The Director General of Fair Trading has supported the idea that the onus of proof should change. In December 1986 he suggested that the reversal of the onus of proof, perhaps on mergers above a certain size, could be a way of tackling the problem of financial markets taking an excessively short-term view which could be against the public interest.
The scale of merger activity has been on an upward trend during the 1980s. In 1988, the total value of mergers and acquisitions exceeded a record £22 billion involving 1,200 companies. Mergers are generally reckoned to be an inefficient means of growth compared with new investment in plant and equipment, yet total spending on acquisitions is twice the level of manufacturing investment and over half the level of investment in all companies. All the research evidence is that more than half of all mergers lead to a decline in or, at best, a neutral effect on performance, as measured by profits and the return on assets.

Mr. Tim Smith: If mergers are an inefficient means of securing growth, why did the Labour Government go out of their way in the 1960s to promote huge mergers through the Industrial Reorganisation Corporation?

Mr. Garrett: That policy was unsuccessful but it must be put in the context of the management ideology of the time. I was a manager in industry at that time and it was generally thought that large conglomerate organisations were the appropriate way to growth. Management has changed since then, partly as a result of the greater ability to manage smaller companies through the development of inflation technology, about which the hon. Gentleman will know as well as anybody else. It was generally thought at


the time that what we now call "gigantism" but was then thought to be "economy of scale" were widely appropriate. The Labour Government of the day was as wrong about that as most of the great industrialists. At that time Lord Weinstock was putting together GEC. One can remember the growth of large conglomerates in the private sector which are now no doubt being unbundled as management fashions change. The hon. Gentleman has, as so often, made a valid point.
In other mergers, improvements in efficiency tend to be no greater than what would have been expected in the absence of a merger. Such findings are supported by the Government's 1978 Green Paper, Cmnd. 7198—the Leisner report on mergers policy. That considered several studies but attempted to evaluate the benefits of mergers by looking at post-merger profitability and before the mergers took place. Those studies produced the finding that in roughly half the cases examined the merger had resulted in an unfavourable or a neutral effect on the profitability of the companies concerned.
The Department of Transport's 1988 report on mergers policy referred to later studies, on the same lines as the Leisner study, which on other criteria
reinforced the findings of poor post-merger performance." The growth of virtually unregulated mergers led to defensive management, what we called in Committee "short-termism", rather than risk-taking management which makes a company vulnerable to takeover. It also means that companies aim for size rather than competitiveness. Managers are preoccupied with short-term survival and a cautious attitude to investment, training and research and development, because any drop in short-term profits will be translated into falls in the share price and increase vulnerability to takeover.
As the—I was about to say the present Chancellor of the Exchequer, but that is wrong. He was the Chancellor of the Exchequer until 5 or 6 o'clock this evening.

Mr. Tim Smith: It is rather an old speech.

Mr. Garrett: I wrote it yesterday. Things change so fast. In June 1986, the right hon. Member for Blaby (Mr. Lawson) said:
The big institutional investors nowadays increasingly react to short-term pressure on investment performance…They are unwilling to countenance long-term investment or a sufficient expenditure on research and development.
Incentive schemes for pension fund managers, for example, are based on short-term horizons—quarterly and annual performance—so that their tendency is also to favour the short term.
We have had the example of virtually bid-proof companies in Switzerland, but much the same is true elsewhere in Europe, and certainly in Japan. In Germany and France, the equivalents of the Monopolies and Mergers Commission are much less likely to allow control of domestic companies to move abroad. I remember that, when I was a manager in industry, German law—or German convention or practice—laid down that what was called "mind and management" of a company operating in Germany should reside there. In 1988, European acquisitions in the United Kingdom were at nearly twice the value of United Kingdom acquisitions in Europe.
Lately we have seen the effects of an import from the United States—the colossal highly leveraged or "junk bond" bid—in the £13·4 billion Hoylake bid for British American Tobacco, which the Minister has refused to refer

to the MMC, although the potential victim is one of our largest companies. We discussed the possible effects of that bid with him late one night. But for the late Chancellor's constant increases in interest rates, there would no doubt have been many more bids based on the issuing of high-interest bonds on very little security, which can be redeemed only by the break-up of the victim company and the consequential loss of jobs.
We think that it is time that a brake was applied to this merger mania by our putting the public interest first, and that is the purport of the new clauses. By "public interest" we mean not only competition but consumer interest, innovation and development, the balanced distribution of industry, and the international competitive position of British producers. If those criteria sound familiar, it is because they are all in the Fair Trading Act 1973.

Mr. Cousins: The two new clauses do not require us to take a view about whether mergers are right or wrong; they simply require the reference of a merger for considerations of public interest. What the judgment of public interest would be in any particular case would be a matter for the relevant regulatory body. I do not feel that we need to debate the values or otherwise of mergers, as such.
My hon. Friend the Member for Norwich, South (Mr. Garrett) referred to the takeover bid for BAT by Hoylake. One of the things that I find most objectionable about that attempt is the fact that a pleasant seaside resort on the Wirral peninsula should have its name flung into the centre of a debate of this kind: I think that the good name of Hoylake the town will suffer considerably for a long time, to the disadvantage of its inhabitants.
That bid may be right or it may be wrong, but it raises very relevant questions of public interest. The stated purpose of a great many of the major acquisitions of the past few years has been to deconcentrate and demerge; the purpose of the takeover of BAT is to dismember it, to liberate brand names, asset values or public good will—the particular aspects of a company's operation—and to put them on the market and find buyers for them.

Mr. Tim Smith: If the Labour party is now so opposed to conglomerates, why is it so unhappy about the proposal to unbundle BAT? The hon. Gentleman said earlier that we were not discussing the merits of mergers. At present the law is so constructed that the presumption is in their favour; the Labour party proposes to create a presumption against them.

Mr. Cousins: BAT is a good example. We are not required to decide whether what is proposed for BAT by the misnamed Hoylake, or by the board of directors is right or wrong. Incidentally, at a recent annual meeting, one shareholder who, since his name has already been mentioned tonight, ought to get a small record in the history books—a man called Antonio von Marx—objected to that proposal. I cannot be sure whether Mr. Antonio von Marx is related to the other Marxes who have been referred to tonight, but at the most recent annual general meeting of BAT, a Mr. Marx was very unhappy about the proceedings.
The point is not whether we, in our own personal judgments decide whether the proposed takeover of BAT—the unbundling version proposed by Hoylake, or the defensive version proposed by the board of directors—is right or wrong. Our concern is that matters of public


interest are involved in that operation. In the final judgment, what weight should be put upon any or all the proposals involved in that exercise is quite another matter. We all have our own views about that and about each specific proposal.
Matters of public interest are raised in deciding whether the exercise should be launched in such a manner, and if it is, whether it is right that we should have no regulatory mechanism available whereby the particular proposals that are made, either offensively by Hoylake or defensively by the board of directors, are appropriate and in the long-term interests of the public and the country.
In any specific case it may be right or wrong to dismantle conglomerates, but the two clauses proposed by my hon. Friend the Member for Norwich, South (Mr. Garrett) make no judgments as to what might be the outcome in particular cases. They require only that the public interest involved in bids such as the one for BAT should be tested in an appropriate regulatory arena. That is all they ask, and it is a modest, limited and sensible request.
Other Opposition Members—I suspect, at least one hon. Member present today—have reservations about takeover bids financed on the so-called junk bond basis. Yet the clauses do not require us necessarily to take the view that bids financed by junk bonds are wrong. The clauses ask only that the public interest aspects of those suggestions, and the counter suggestions from the board of directors conducting the defence against those operations are tested.
Insurance is a very productive industry. If we are ever to get the balance of payments right, we should talk up the part played by industries such as insurance.

Mr. John Garrett: Hear, hear.

Mr. Cousins: I thought that my hon. Friend the Member for Norwich, South would like that one.
Just before the single market in 1992 and when the fate of our insurance industry is so important to the country, it is important that major insurance companies such as Eagle Star and Pearl should not be exposed to the risks to their operations that they face today.
We are not saying that it would be wrong to stop the proposed mergers, but it must be right to suggest that we require a regulatory mechanism that would test those bids against some consideration of public interest. That is the modest demand that the new clauses make, and surely no sensible person could refuse or refute it.

Mr. Redwood: It will come as no surprise to the hon. Member for Norwich, South (Mr. Garrett) that I find the new clauses difficult to accept. He claimed that the Government are implying that mergers are good because they may lead to economies of scale and keep management on their toes. That is not the burden of the Government's case. The Government's case is much simpler—it is that in most cases shareholders and bankers should decide about mergers, particularly shareholders, who have the votes and own the assets. As past Labour Governments have shown, Governments should not attempt to meddle and make decisions about how best to construct or reorganise industry. Governments in the past have left industry with

little profit, little return on capital and little chance of employing more people and making the investment that we need.
The hon. Member for Norwich, South mentioned the Tebbit doctrine and the competition criterion, which has been important to the Government's merger policy. He pointed out that we have kept the public-interest criterion, but we have made it clear that it rarely applies. Its most notable manifestation is where competition will be limited and market dominance will be created by a merger that may be against the public interest.
I rebut the idea that there has been no coherence to the Government's approach to merger policy. The Tebbit doctrine, the Blue Book and the statements made by my right hon. Friend the Secretary of State have provided a continuity of policy and have made it quite clear that the criterion is usually competition, but that public-interest matters may have to be judged by the Director General of Fair Trading or the Secretary of State.
The hon. Member for Norwich, South made much of the fact that some studies, including the Leisner study, which is about 10 years old, have suggested that half of all mergers, or more, might produce disappointing profits and returns on assets. Again, the Government's case is that shareholders should take that into account when making their decisions. There is no evidence that Governments would be better at making those decisions. If the Labour party's policies were implemented, the Government of the day might succeed in blocking half of the mergers. That would add to profitability and investment but let through the half that did not. Such intervention, based on the experiences of the 1970s, would be far from helpful for the industrial recovery that is now under way.
We were told that companies aim for size rather than competitiveness. That is an unreasonable description of the way that companies behave. Large bids, particularly in the United Kingdom, show that size is not a bar to a bid being made or, in the United States, to a takeover being completed. Companies simply aiming for size and not taking into account the need for competitiveness, good performance and earnings and dividend progression, will not succeed in the way that the hon. Gentleman suggests. That is not a good argument against the Government's merger policy.
Companies can defend themselves against predatory attack, and many have done so successfully by showing a basis of achievement and often by stressing their belief in long-term investment, long-term projects and research and development, which all hon. Members wish to see as the hallmark of good industrial practice.
The hon. Members for Norwich, South and for Newcastle upon Tyne, Central (Mr. Cousins) expressed their displeasure at certain types of highly leveraged bids. I cannot comment on a particular case because I do not want to put my right hon. Friend the Secretary of State in any difficulty. He must retain his powers and be entirely independent in judging specific bids.
I should like to make one or two brief comments on the general question of leveraged bids. A break-up of a company through a merger does not necessarily lead to a loss of jobs or a worse performance, as the hon. Member for Newcastle upon Tyne, Central accepted. He was in some muddle about whether demerger was good or bad because he was in some muddle about whether conglomerates were always, or sometimes, bad. There are types of break-up that may create independence for


subsidiaries which could help them by giving them greater morale, separate access to capital and so on, which they may have lacked under the conglomerate.

Mr. John Garrett: Can the hon. Gentleman give an example?

Mr. Redwood: I can think of companies where that would happen, but I do not want to go into that, for the reasons which I described earlier. I do not in any way want to prejudice any case that might come before my right hon. Friend the Secretary of State.

Mr. Garrett: What about cases in the past?

Mr. Redwood: I shall give the hon. Gentleman a good example in the past. The demerger of some companies from British Leyland, which was probably the worst conglomerate and was organised through a Government action, was extremely helpful. There are good cases of companies that have done much better in their demerged condition.

Mr. John Garrett: What is the market share in the domestic market of the former companies which were part of British Leyland compared with when they were part of British Leyland?

Mr. Redwood: Most of the decline in the market share of the Austin Rover Group occurred when it was a nationalised conglomerate, investing a large amount of money voted by the House. Much of that money went into investments in a model range that was not popular. The counter-argument can be shown by the way in which Jaguar's profitability and investment improved greatly after it was demerged from British Leyland.

Mr. Anthony Nelson: I very much agree with the sentiments behind my hon. Friend's address. I followed what he said about leveraged bids. I should like ' to put to him one scenario which is relevant when casting policy. Leveraged bids tend to be a function of bull markets. If a bull market ceases to be a bull market, as it did for a few days recently in the United States and this country, one sees what happens to leveraged bids. For example, in the case of United Air Lines, they fall by the wayside. Happily, in a sense the bids were not under way. In other words, although the debt might have been underwritten, the company had not been acquired.
The problem arises in a bear market when shares are falling steeply or successively and a leveraged bid has been made. The company making the leveraged bid finds itself owning the company that it acquired in the hope that it could sell off sections of it in part or in whole to redeem the debt. It finds that they do not begin to recover the debt. It therefore has to sell most, if not all, of the company at knockdown prices and perhaps even go into receivership. This is why such deals are often carried out through vehicle companies rather than subsidiaries of major companies. No Government can afford to ignore a future scenario in which that may happen for cyclical reasons. The Government, the employees and the industrial companies may be left in a position where the companies have to be sold off or shut down.
Does my hon. Friend feel—I am sure that he does—that in a changed market that might be a legitimate criterion for a reference and for assessment of whether such a merger was in the public interest?

Mr. Redwood: I thought that I was going to agree with my hon. Friend, but at the end was not able to do so. He was right to say——

Mr. John Garrett: Answer.

Mr. Redwood: I will answer, if the hon. Gentleman will contain himself.
My hon. Friend is right—there could be dangers in certain kinds of leveraged bids. I have no particular case in this country in mind, for reasons which I have outlined. I have made it clear that shareholders and bankers—the principal interest groups concerned—should be very aware exactly how that debt will be serviced and repaid when considering any proposal which they may be financing or to which they may be responding. If the debt is to be repaid primarily out of asset sales, they might want to ask questions about the price at which assets would be sold, whether it was feasible to sell them and the timescale within which that would be achieved. They may well have to take market conditions into account as my hon. Friend said.
If the bidder and the banks that are backing the transaction intend to finance it out of increased profitability through merger benefits—increased efficiency, performance and the like—I hope that shareholders and bankers will ask the right questions, such as, "What happens if the underlying market for the product declines, or if there is a slowdown in economic growth in the major world markets in which the company is operating." Usual questions of prudence should be asked. The people who make the judgments should have a good understanding of the relative risks that are being run.
If a company is highly leveraged in its operations, and added to that is high leveraging through its financing, the risk of corporate failure or of disaster is multiplied considerably. I hope that shareholders and bankers will take such considerations into account.
The Government's case is that it cannot be the task of Government to make such decisions. Whether a bond is junkie must be determined by those who might buy or sell it. It is discovered whether the bond is junkie only some years later. If the paper is issued and it turns out that the transaction was very good, the company's profits go up, the debt is repaid, and it does not turn out to be junkie. If a wrong judgment is made and the company is saddled with too much debt, trading conditions deteriorate and things go wrong, the bond turns out to be junkie. That is the problem.
The Government cannot make hundreds of decisions about the junkiness or otherwise of financing. We have made it quite clear that our policy on these matters is to trust the judgment of shareholders, bankers and others, and refer only if leveraging is allied with some other characteristics which may operate against the public interest. That is a clear policy that has been laid down by successive Secretaries of State, and I think that it will serve us well. The Governor of the Bank of England has recently commented on financing systems in various sectors of the economy.
The requirement to make a reference, as suggested by the Labour party, would make a substantial difference to the way in which merger policy operates. At the moment, about 10 out of 300 mergers are referred. It is difficult to calculate how many might be caught under Labour's


recommendations, but I think that at least four or five times as many would because they would represent quite a substantial shift.
Labour's proposal reminds me of a return to the bad old days when businesses were run from Whitehall, and when it was assumed that three or four politicians sitting in certain Whitehall offices were able to make all these judgments about the future of British industry which enterprising business men were unable to make.
In the 1970s, when that belief was rife, industrial profitability fell to record low levels, there was a large number of redundancies from nationalised industries and Government policy seemed to be based on organising conglomerate mergers and public monopolies which did not serve the customer any better than the people who worked in them or the markets in which they operated.
It is better to trust business men to make business judgments. Politicians are here to defend the public interest. That is exactly what our largely competition-based reference policy produces. There is great coherence in the policy. It has been stated clearly on several occasions. My right hon. Friend the Secretary of State and the director general are always prepared to examine a case if a public interest issue arises. If one arises, the merger should be referred and investigated exhaustively.
I urge the House to reject the new clause.

Mr. John Garrett: I am not very hapy with the Minister's response. I have met him across the Dispatch Box several times now. We are beginning to size him up. He is really just a housetrained version of the right hon. Member for Chingford (Mr. Tebbit). Underneath that shy, fawn-like exterior is a marketeer, red in tooth and claw. Moreover, he is a follower of policies which, in spite of what he said at the end of his speech, have left us with an unbelievably high balance of payments deficit. Unemployment is officially registered at about 2 million, but is probably more than 3 million, and inflation is the highest in western Europe, so the Minister may come to regret his words.
11.45 pm
We regard the reversal of the burden of proof in mergers as serious and central to our beliefs about the way in which mergers should be regulated. I invite my right hon. and hon. Friends, therefore, to join me in the Division Lobby in support of the new clause.

Question put, That the clause be read a Second time:—

The House divided: Ayes 29, Noes 122.

Division No. 357]
[11.45 pm


AYES


Allen, Graham
Garrett, John (Norwich South)


Banks, Tony (Newham NW)
Hughes, John (Coventry NE)


Barnes, Harry (Derbyshire NE)
Jones, Martyn (Clwyd S W)


Battle, John
Meale, Alan


Bennett, A. F. (D'nt'n &amp; R'dish)
Michie, Bill (Sheffield Heeley)


Bruce, Malcolm (Gordon)
Nellist, Dave


Carlile, Alex (Mont'g)
Patchett, Terry


Clay, Bob
Powell, Ray (Ogmore)


Cousins, Jim
Quin, Ms Joyce


Cryer, Bob
Ross, Ernie (Dundee W)


Dixon, Don
Skinner, Dennis


Fields, Terry (L'pool B G'n)
Steel, Rt Hon David


Foster, Derek
Wall, Pat





Wallace, James
Tellers for the Ayes:


Wareing, Robert N.
Mrs. Llin Golding and


Welsh, Michael (Doncaster N)
Mr. Frank Haynes.




NOES


Alexander, Richard
Heddle, John


Amess, David
Howarth, G. (Cannock &amp; B'wd)


Amos, Alan
Hughes, Robert G. (Harrow W)


Arbuthnot, James
Hunt, Sir John (Ravensbourne)


Arnold, Jacques (Gravesham)
Hunter, Andrew


Atkinson, David
Irvine, Michael


Baker, Rt Hon K. (Mole Valley)
Jack, Michael


Baker, Nicholas (Dorset N)
Janman, Tim


Bennett, Nicholas (Pembroke)
Johnson Smith, Sir Geoffrey


Boswell, Tim
Kirkhope, Timothy


Bowden, A (Brighton K'pto'n)
Knapman, Roger


Bowis, John
Knight, Greg (Derby North)


Brazier, Julian
Knowles, Michael


Brooke, Rt Hon Peter
Lester, Jim (Broxtowe)


Brown, Michael (Brigg &amp; CI't's)
Lilley, Peter


Browne, John (Winchester)
Lord, Michael


Buck, Sir Antony
Maclean, David


Burns, Simon
McNair-Wilson, Sir Patrick


Burt, Alistair
Malins, Humfrey


Butterfill, John
Mans, Keith


Carlisle, John, (Luton N)
Martin, David (Portsmouth S)


Carlisle, Kenneth (Lincoln)
Maxwell-Hyslop, Robin


Carrington, Matthew
Meyer, Sir Anthony


Carttiss, Michael
Mills, Iain


Cash, William
Mitchell, Sir David


Channon, Rt Hon Paul
Morris, M (N'hampton S)


Chapman, Sydney
Moss, Malcolm


Chope, Christopher
Nelson, Anthony


Clark, Dr Michael (Rochford)
Neubert, Michael


Clark, Sir W. (Croydon S)
Nicholson, Emma (Devon West)


Clarke, Rt Hon K. (Rushcliffe)
Norris, Steve


Conway, Derek
Paice, James


Coombs, Anthony (Wyre F'rest)
Patnick, Irvine


Cran, James
Pattie, Rt Hon Sir Geoffrey


Davis, David (Boothferry)
Peacock, Mrs Elizabeth


Day, Stephen
Porter, David (Waveney)


Dorrell, Stephen
Powell, William (Corby)


Dover, Den
Redwood, John


Dunn, Bob
Ridley, Rt Hon Nicholas


Durant, Tony
Shepherd, Richard (Aldridge)


Favell, Tony
Smith, Tim (Beaconsfield)


Fenner, Dame Peggy
Soames, Hon Nicholas


Fishburn, John Dudley
Stern, Michael


Forsyth, Michael (Stirling)
Taylor, John M (Solihull)


Forth, Eric
Taylor, Teddy (S'end E)


Fox, Sir Marcus
Thompson, D. (Calder Valley)


Freeman, Roger
Thurnham, Peter


French, Douglas
Townsend, Cyril D. (B'heath)


Garel-Jones, Tristan
Twinn, Dr Ian


Gill, Christopher
Waddington, Rt Hon David


Glyn, Dr Alan
Walden, George


Goodlad, Alastair
Waller, Gary


Goodson-Wickes, Dr Charles
Ward, John


Greenway, John (Ryedale)
Wardle, Charles (Bexhill)


Gregory, Conal
Watts, John


Griffiths, Peter (Portsmouth N)
Wheeler, John


Hague, William
Widdecombe, Ann


Hamilton, Hon Archie (Epsom)
Winterton, Nicholas


Hamilton, Neil (Tatton)
Wood, Timothy


Hanley, Jeremy



Hargreaves, Ken (Hyndburn)
Tellers for the Noes:


Harris, David
Mr. Tom Sackville and


Hayward, Robert
Mr. Michael Fallon.


Heathcoat-Amory, David

Question accordingly negatived.

Clause 139

TEMPORARY RESTRICTIONS ON SHARE DEALING

Mr. Nicholas Baker: I beg to move amendment No. 310, in page 156, line 6, leave out 'any enterprise' and insert 'an enterprise'.

Madam Deputy Speaker: With this it will be convenient to consider also the following: Amendment No. 311, in page 156, line 8, leave out 'any such' and insert 'such an'.
Amendment No. 312, in page 156, line 15, after 'relates', insert
'other than the enterprise referred to in paragraph (a) above'.

Mr. Baker: I am glad of the opportunity to move these three simple amendments. Clause 139 is designed to prevent a bidding company from acquiring shares in the target while a Monopolies and Mergers Commission investigation is taking place. The effect of the clause as drafted——

Mr. Frank Haynes: On a point of order, Madam Deputy Speaker. Could the conference taking place behind the Chair please be stopped?

Madam Deputy Speaker: I am sure that hon. Members are paying attention.

Mr. Baker: Thank you, Madam Deputy Speaker. The effect of the clause as drafted is to prevent a member of a group of persons who control the bidder from buying any further shares in the bidder. That does not seem to be what the clause should be aimed at. It goes beyond the original intention of the clause and those which drafted it. I hope that my lion. Friend the Minister will consider favourably my amendments which would put that matter right.

Mr. Redwood: The objective of the amendments appears to be to relax the temporary prohibition on share dealings following a reference so that parties on one side of a merger can continue to acquire one another's shares. Although we are not unsympathetic to the reasoning behind that, we consider that it would be a mistake to tackle the issue by amending the Bill rather than by using the Secretary of State's power to issue consents.
Clause 139 makes it unlawful for the duration of the MMC inquiry for any parties to propose a merger which is referred, or to acquire shares or interests in shares in any of the parties, except with the Secretary of State's consent. The prohibition extends to all those covered by the reference and their subsidiaries and associates. This prohibition puts on a permanent statutory basis the standard practice of making individual orders in each case under the Fair Trading Act 1973 to limit the holding which bidders can acquire.
The purpose of the prohibition is to prevent the outcome of MMC inquiry or any action necessary following it from being prejudiced by the merger going ahead in the meantime. The complexity of many merger arrangements has led us to make the prohibition in the Bill a general one which applies to all possible relevant parties to a merger. It would otherwise be very difficult to catch everyone whom we might conceivably wish to catch. Rather than have a complicated——

It being Twelve o'clock, MADAM DEPUTY SPEAKER proceeded, pursuant to the Order [26 October], to put forthwith the Question already proposed from the Chair.

Amendment negatived.

MADAM DEPUTY SPEAKER then proceeded to put forthwith the Question on new clauses and new schedules relating to parts VI and VII of the Bill, standing in the name of, or moved by, a Member of the Government to that part of the Bill to be concluded at Twelve o'clock.

Amendment made: No. 151, New Schedule—

'COMPANY CONTRACTS, SEALS, &C.: FURTHER PROVISIONS

Execution of deeds abroad

1.—(1) Section 38 of the Companies Act 1985 (execution of deeds abroad) is amended as follows.

(2) In subsection (I) (appointment of attorney to execute deeds), after "A company may" insert "under the law of England and Wales".

(3) For subsection (2) (effect of deed executed by attorney) substitute—
(2) A deed executed by such an attorney on behalf of the company has the same effect as if it were executed under the company's common seal.

Official seal for use abroad

2.—(1) Section 39 of the Companies Act 1985 (power to have official seal for use abroad) is amended as follows.

(2) In subsection (1), after "A company" insert "which has a common seal" and for "the common seal of the company" substitute "its common seal".

(3) For subsection (2) (effect of sealing with official seal) substitute—
(2) The official seal when duly affixed to a document has the same effect as the company's common seal.".

(4) In subsection (3) (instrument authorising person to affix official seal), after "by writing under its common seal" insert "or, in the case of a company registered in Scotland, subscribed in accordance with section 36B,".

Official seal for share certificates, &c.

3.—(1) Section 40 of the Companies Act 1985 (official seal for share certificates, &c.) is amended as follows.

(2) After "A company" insert "which has a common seal" and for "the company's common seal" substitute "its common seal".

At the end add—
The official seal when duly affixed to a document has the same effect as the company's common seal.".

Authentication of documents

4. In section 41 of the Companies Act 1985 (authentication of documents), for the words from "may be signed" to the end substitute "is sufficiently authenticated for the purposes of the law of England and Wales by the signature of a director, secretary or other authorised officer of the company.".

Share certificate as evidence of title

5. For section 186 of the Companies Act 1985 (certificate to be evidence of title) substitute—

Certificate to be evidence of title

186.—(1) A certificate under the common seal of the company (or, in the case of a company registered in Scotland, subscribed in accordance with section 36B) specifying any shares held by a member is—

(a) in England and Wales, prima facie evidence, and
(b) in Scotland, sufficient evidence unless the contrary is shown, of his title to the shares.".

Share warrants to bearer

6. For section 188 of the Companies Act 1985 (issue and effect of share warrant to bearer) substitute—

Issue and effect of share warrant to bearer

188.—(1) A company limited by shares may, if so authorised by its articles, issue with respect to any fully paid shares a warrant (a "share warrant") stating that the bearer of the warrant is entitled to the shares specified in it.

(2) A share warrant issued under the company's common seal (or, in the case of a company registered in


Scotland, subscribed in accordance with section 36B) entitles the bearer to the shares specified in it; and the shares may be transferred by delivery of the warrant.

(3) A company which issues a share warrant may, if so authorised by its articles, provide (by coupons or otherwise) for the payment of the future dividends on the shares included in the warrant.".

Identification of company on common seal

7. In section 350 of the Companies Act 1985 (identification of company on company seal), for subsection (1) substitute—
(1) A company which has a common seal shall have its name engraved in legible characters on the seal; and if it fails to comply with this subsection it is liable to a fine.".

Floating charges under Scots law

8. In section 462 of the Companies Act 1985 (power of company to create floating charge), for subsections (2) and (3) substitute—
(2) In the case of a company which the Court of Session has jurisdiction to wind up, a floating charge may be created only by a written instrument which is presumed under section 36B to be subscribed by the company.".

9. In section 466(2) of the Companies Act 1985 (execution of instrument altering floating charge)—

(a) at the beginning of the subsection insert "Without prejudice to any enactment or rule of law regarding the execution of documents,";
(b) omit paragraph (a);
(c) the end of paragraph (b) insert "; or", and
(d) omit paragraph (d) and the word "or" preceding it.

10. In section 53(3) of the Insolvency Act 1986 (execution of instrument appointing receiver), in paragraph (a) for "in accordance with the provisions of section 36 of the Companies Act as if it were a contract" substitute "in accordance with section 36B of the Companies Act 1985".'.—[Mr. Redwood.]

`.—(1) The powers conferred by this section are exercisable in relation to a recognised UK investment exchange or recognised UK clearing house.

(2) Where in any case an exchange or clearing house has not taken action under its default rules—

(a) if it appears to the Secretary of State that it could take action, he may direct it to do so, and
(b) if it appears to the Secretary of State that it is proposing to take or may take action, he may direct it not to do so.

(3) Before giving such a direction the Secretary of State shall consult the exchange or clearing house in question; and he shall not give a direction unless he is satisfied, in the light of that consultation—

(a) in the case of a direction to take action, that failure to take action would involve undue risk to investors or other participants in the market, or
(b) in the case of a direction not to take action, that the taking of action would be premature or otherwise undesirable in the interests of investors or other participants in the market.

(4) A direction shall specify the grounds on which it is given.

(5) A direction not to take action may be expressed to have effect until the giving of a further direction (which may be a direction to take action or simply revoking the earlier direction).

(6) No direction shall be given not to take action if, in relation to the person in question—


(a) a bankruptcy order or an award of sequestration of his estate has been made, or an interim receiver or interim trustee has been appointed, or
(b) a winding up order has been made, a resolution for voluntary winding up has been passed or an administrator, administrative receiver or provisional liquidator has been appointed;
and any previous direction not to take action shall cease to have effect on the making or passing of any such order, award or appointment.

(7) Where an exchange or clearing house has taken or been directed to take action under its default rules, the Secretary of State may direct it to do or not to do such things (being things which it has power to do under its default rules) as are specified in the direction.

The Secretary of State shall not give such a direction unless he is satisfied that it will not impede or frustrate the proper and efficient conduct of the default proceedings.

(8) A direction under this section is enforceable, on the application of the Secretary of State, by injunction or, in Scotland, by an order under section 45 of the Court of Session Act 1988; and where an exchange or clearing house has not complied with a direction, the court may make such order as it thinks fit for restoring the position to what it would have been if the direction had been complied with.'.—[Mr. Redwood.]

Brought up, read the First and Second time, and added to the Bill.

New clause 36—Applications to determine whether default proceedings to be taken—

`.—(1) Where there has been made or passed in relation to a member or designated non-member of a recognised investment exchange or a member of a recognised clearing house—

(a) a bankruptcy order or an award of sequestration of his estate, or an order appointing an interim receiver of his property, or
(b) an administration or winding up order, a resolution for voluntary winding up or an order appointing a provisional liquidator,
and the exchange or clearing house has not taken action under its default rules in consequence of the order, award or resolution or the matters giving rise to it, a relevant office-holder appointed by, or in consequence of or in connection with, the order, award or resolution may apply to the Secretary of State.

(2) The application shall specify the exchange or clearing house concerned and the grounds on which it is made.

(3) On receipt of the application the Secretary of State shall notify the exchange or clearing house, and unless within three business days after the day on which the notice is received the exchange or clearing house—

(a) takes action under its default rules, or
(b) notifies the Secretary of State that it proposes to do so forthwith,
then, subject as follows, the provisions of sections 148 to 155 above do not apply in relation to market contracts to which the member or designated non-member in question is a party or to anything done by the exchange or clearing house for the purposes of, or in connection with, the settlement of any such contract.

For this purpose a "business day" means any day which is not a Saturday or Sunday, Christmas Day, Good Friday or a bank holiday in any part of the United Kingdom under the Banking and Financial Dealings Act 1971.

(4) The provisions of sections 148 to 155 are not disapplied if before the end of the period mentioned in subsection (3) the Secretary of State gives the exchange or clearing house a direction under section (Powers of Secretary of State to give directions) (2)(a) (direction to take action under default rules).

No such direction may be given after the end of that period.

(5) If the exchange or clearing house notifies the Secretary of State that it proposes to take action under its default rules forthwith, it shall do so; and that duty is enforceable, on the application of the Secretary of State, by injunction or, in Scotland, by an order under section 45 of the Court of Session Act 1988.'.—[Mr. Redwood.]

Brought up, read the First and Second time, and added to the Bill.

New clause 37—Certain money market institutions—

`.—(1) The Secretary of State may by regulations provide that this Part applies to contracts of any specified description in relation to which settlement arrangements are provided by a person for the time being included in a list maintained by the Bank of England for the purposes of this section, as it applies to contracts connected with a recognised investment exchange or recognised clearing house.

(2) The Secretary of State shall not make any such regulations unless he is satisfied, having regard to the extent to which the contracts in question—
(a) involve, or are likely to involve, investments falling within paragraph 2 of Schedule 5 to the Financial Services Act 1986 (money market investments), or
(b) are otherwise of a kind dealt in by persons supervised by the Bank of England,
that it is appropriate that the arrangements should be subject to the supervision of the Bank of England.

(3) The approval of the Treasury is required for—
(a) the conditions imposed by the Bank of England for admission to the list maintained by it for the purposes of this section, and
(b) the arrangements for a person's admission to and removal from the list;
and any regulations made under this section shall cease to have effect if the approval of the Treasury is withdrawn, but without prejudice to their having effect again if approval is given for fresh conditions or arrangements.

(4) The Bank of England shall publish the list as for the time being in force and provide a certified copy of it at the request of any person wishing to refer to it in legal proceedings.

A certified copy shall be evidence (in Scotland, sufficient evidence) of the contents of the list; and a copy purporting to be certified by or on behalf of the Bank shall be deemed to have been duly certified unless the contrary is shown.

(5) Regulations under this section may, in relation to a person included in the list—
(a) apply, with such exceptions, additions and adaptations as appear to the Secretary of State to be necessary or expedient, such of the provisions of the Financial Services Act 1986 as he considers appropriate, and
(b) provide that the provisions of this Part apply with such exceptions, additions and adaptations as appear to the Secretary of State to be necessary or expedient.

(6) Before making any regulations under this section, the Secretary of State shall consult the Treasury and the Bank of England.

(7) In section 84(1) of the Banking Act 1987 (disclosure of information obtained under that Act), in the Table showing the authorities to which, and functions for the purposes of which, disclosure may be made, at the end add—


"A person included in the list maintained by the Bank for the purposes of section (Certain money market institutions)of the Companies Act 1989.
Functions under settlement arrangements to which regulations under that section relate.".'.—[Mr. Redwood.]

Brought up, read the First and Second time, and added to the Bill.

New clause 38—Settlement arrangements provided by the Bank of England—

`.—(1) The Secretary of State may by regulations provide that this Part applies to contracts of any specified description in relation to which settlement arrangements are provided by the Bank of England, as it applies to contracts connected with a recognised investment exchange or recognised clearing house.

(2) Regulations under this section may provide that the provisions of this Part apply with such exceptions, additions and adaptations as appear to the Secretary of State to be necessary or expedient.

(3) Before making any regulations under this section, the Secretary of State shall consult the Treasury and the Bank of England.'.—[Mr. Redwood.]

Brought up, read the First and Second time, and added to the Bill.

New clause 39—Application of margin not affected by certain other interests—

'.—(1) The following provisions have effect with respect to the application by a recognised investment exchange or recognised clearing house of property (other than land) held by the exchange or clearing house as margin in relation to a market contract.

(2) So far as necessary to enable the property to be applied in accordance with the rules of the exchange or clearing house, it may be so applied notwithstanding any prior equitable interest or right, or any right or remedy arising from a breach of fiduciary duty, unless the exchange or clearing house had notice of the interest, right or breach of duty at the time the property was provided as margin.

(3) No right or remedy arising subsequently to the property being provided as margin may be enforced so as to prevent or interfere with the application of the property by the exchange or clearing house in accordance with its rules.

(4) Where an exchange or clearing house has power by virtue of the above provisions to apply property notwithstanding an interest, right or remedy, a person to whom the exchange or clearing house disposes of the property in accordance with its rules takes free from that interest, right or remedy.'.—[Mr. Redwood.]

Brought up, read the First and Second time, and added to the Bill.

New clause 40—Priority of floating market charge over subsequent charges—

`.—(1) The Secretary of State may by regulations provide that a market charge which is a floating charge has priority over a charge subsequently created or arising, including a fixed charge.

(2) The regulations may make different provision for cases defined, as regards the market charge or the subsequent charge, by reference to the description of charge, its terms, the circumstances in which it is created or arises, the nature of the charge, the person in favour of whom it is granted or arises or any other relevant factor.'.—[Mr. Redwood.]

Brought up, read the First and Second time, and added to the Bill.

New clause 41—Power to make further provision by regulations—

`.—(1) The Secretary of State may by regulations make such further provision as appears to him necessary or expedient for the purposes of this Part.

(2) Provision may, in particular, be made—
(a) for integrating the provisions of this Part with the general law of insolvency, and
(b) for adapting the provisions of this Part in their application to overseas investment exchanges and clearing houses.

(3) Regulations under this section may add to, amend or repeal any of the provisions of this Part or provide that those provisions have effect subject to such additions, exceptions or adaptations as are specified in the regulations.'.—[Mr. Redwood.]

Brought up, read the First and Second time, and added to the Bill.

New clause 42—Construction of references to parties to market contracts

'.—(1) Where a person enters into market contracts in more than one capacity, the provisions of this Part apply (subject as follows) as if the contracts entered into in each different capacity were entered into by different persons.

(2) References in this Part to a market contract to which a person is a party include (subject as follows, and unless the context otherwise requires) contracts to which he is party as agent.

(3) The Secretary of State may by regulations—
(a) modify or exclude the operation of subsections (1) and (2), and


(b) make provision as to the circumstances in which a person is to be regarded for the purposes of those provisions as acting in different capacities.'.—[Mr. Redwood.]

Brought up, read the First and Second time, and added to the Bill.

MADAM DEPUTY SPEAKER then proceeded to put forthwith the Question on amendments relating to parts VI and VII of the Bill standing in the name of a member of the Government.

Clause 139

TEMPORARY RESTRICTIONS ON SHARE DEALINGS

Amendments made: No. 152, page 158, line 2, leave out 'also applies' and insert
'and section 736A of that Act also apply'.

No. 153, in page 158, line 4, leave out 'it applies' and insert 'they apply'.

No. 154, in page 158, line 6, leave out 'subsection (5) of that section' and insert
'subsections (8) and (9) of section 736A'.

No. 155, in page 158, line 23, at end insert—
'(2) This section does not apply in relation to any merger reference made before the passing of this Act.'.—[Mr. Redwood.]

Clause 140

OBTAINING CONTROL BY STAGES

Amendment made: No. 156, in page 159, line 25, at end insert—
'(2) This section does not apply in relation to any merger reference made before the passing of this Act.'.—[Mr. Redwood.]

Schedule 19

AMENDMENTS ABOUT MERGERS AND RELATED MATTERS

Amendments made: No. 157, in page 281, line 27, at end insert—
'(2) This paragraph does not apply in relation to any newspaper merger reference made before the passing of this Act.'.

No. 158, in page 282, line 27, at end insert—
'9A. Paragraphs 4 to 9 (and the repeals in Schedule 22 corresponding to paragraphs 7 and 8(a)) do not apply in relation to any merger reference made before the passing of this Act.'.

No. 159, in page 282, line 48, at end insert—
'(2) This paragraph does not apply in relation to any report made before the passing of this Act.'.

No. 160, in page 283, line 37, at end insert—
'(5) Sub-paragraphs (1) and (4) (and the repeal in Schedule 22 corresponding to sub-paragraph (4)) do not apply in relation to any report made before the passing of this Act.'.

No. 161, in page 283, line 44, after 'makes,' insert 'has
made'.

No. 162, in page 283, line 48, after 'makes,' insert 'has made'.

No. 163, in page 284, line 3, at end insert—
'(4) The amendments made by sub-paragraphs (1) to (3) have effect in relation to the making of any order under section 89 of the Fair Trading Act 1973 after the passing of this Act, whether the principal order (within the meaning of that section) was made before or after that time.'.

No. 164, in page 284, line 21, at end insert—

'(2) This paragraph does not apply in relation to any report made before the passing of this Act.'.

No. 165, in page 284, line 46, at end insert—
'(2) This paragraph has effect in relation to the laying of any draft order under paragraph 4 of Schedule 9 to the Fair Trading Act 1973 after the passing of this Act, whether the notice under that Schedule was published before or after that time.'.

No. 166, in page 285, line 11, leave out
'commencement of paragraph 21 of Schedule 19 to' and insert 'passing of'.

No. 167, in page 285, line 17, leave out
'commencement of paragraph 22 of Schedule 19 to' and insert 'passing of.—[Mr. Redwood.]

New clause 35—Powers of Secretary of State to give directions—

Clause 144

INTRODUCTION

Amendments made: No. 168, in page 161, line 33, leave out `to 160' and insert
'to 155, (Powers of Secretary of State to give directions), (Application to determine whether default proceedings to be taken), 157 to 159, (Certain money market institutions) and (Settlement arrangements provided by the Bank of England)'.

No. 169 in page 161, line 39, leave out '165' and insert
'(Application of margin not affected by certain other interests), ( Priority of floating market charge over subsequent charges) and 166'.

Clause 145

MARKET CONTRACTS

Amendment made: No. 170, in page 162, line 12, leave out sub-paragraph (ii) and (iii).—[Mr. Redwood.]

Clause 146

ADDITIONAL REQUIREMENTS FOR RECOGNITION: DEFAULT RULES, &C

Amendments made: No. 171, in page 163, line 3, leave out 'Part' and insert 'section'.

No. 172, in page 163, line 7, leave out 'The Secretary of State' and insert
'Where the Secretary of State gives such a notice, he.

No. 173, in page 163, line 15, leave out
'notice is given under subsection (3)'

and insert 'the notice was given'.—[Mr. Redwood.]

Schedule 20

ADDITIONAL REQUIREMENTS FOR RECOGNITION

Amendments made: No. 174, in page 285, line 41, leave out paragraphs 1 to 4 and insert—

'1.—(1) The exchange must have default rules which, in the event of a member of the exchange appearing to be unable to meet his obligations in respect of one or more market contracts, enable action to be taken in respect of unsettled market contracts to which he is party.

(2) The rules may authorise the taking of the same or similar action in relations to a member who appears to be likely to become unable to meet his obligations in respect of one or more market contracts.

(3) The rules must enable action to be taken in respect of all unsettled market contracts, other than those entered into by a recognised clearing house for the purposes of or in connection with the provision of clearing services for the exchange.

(4) As regards contracts entered into by the exchange for the purposes of or in connection with the provision of its own


clearing services, the rules must contain provision corresponding to that required by paragraphs 9 to 11 below in the case of a UK clearing house.

(5) As regards other contracts the rules must contain provision complying with paragraphs 2 and 3 below.

Content of rules

2. (1) The rules must provide for all rights and liabilities between those party as principal to unsettled market contracts to which the defaulter is party as principal to be discharged and for there to be paid by one party to the other such sum of money (if any) as may be determined in accordance with the rules.

(2) The rules must further provide—
(a) for the sums so payable in respect of different contracts between the same parties to be aggregated or set off so as to produce a net sum, and
(b) for the certification by or on behalf of the exchange of the net sum payable or, as the case may be, of the fact that no sum is payable.

(3) The rules may make special provision with respect to, or exclude from the provisions required by sub-paragraphs (1) and (2), contracts of any description prescribed for the purposes of this sub-paragraph by regulations made by the Secretary of State.

Notification to other parties affected

3. The exchange must have adequate arrangements for securing that—
(a) parties to unsettled market contracts with a defaulter acting as principal are notified as soon as reasonably practical of the default and of any decision taken under the rules in relation to contracts to which they are a party; and
(b) parties to unsettled market contracts with a defaulter acting as agent and the defaulter's principals are notified as soon as reasonably practicable of the default and of the identity of the other party to the contract.

Application of default rules to designated non-members

4.—(1) The rules may make the same or similar provision in relation to designated non-members as in relation to members of the exchange.

(2) If such provision is made, the exchange must have adequate procedures—
(a) for designating the persons, or descriptions of person, in respect of whom action may be taken,
(b) for keeping under review the question which persons or descriptions of persons should be or remain so designated, and
(c) for withdrawing such designation.

(3) The procedures shall be designed to secure that a person is not or does not remain designated if failure by him to meet his obligations in respect of one or more market contracts would be unlikely adversely to affect the operation of the market, and that a description of persons is not or does not remain designated if failure by a person of that description to meet his obligations in respect of one or more market contracts would be unlikely adversely to affect the operation of the market.

(4) The exchange must have adequate arrangements—
(a) for bringing a designation or withdrawal of designation to the attention of the person or description of persons concerned, and
(b) where a description of persons is designated, or the designation of a description of persons is withdrawn, for ascertaining which persons fall within that description.'.

No. 175, in page 287, line 23, leave out sub-paragraph (1) and insert—
'(1) The clearing house must have default rules which, in the event of a member of the clearing house appearing to be unable to meet his obligations in respect of one or more market contracts. enable action to he taken to close out his position in relation to all unsettled market contracts to which he is a party.'.

No. 176, in page 287, line 40, after `by' insert 'or on behalf of'.

No. 177, in page 287, line 44, after `by' insert 'or on behalf of'.

No. 178, in page 288, line 16, at end insert—
'(3) The reference in paragraph 9 to the rights and liabilities of a defaulter under or in respect of an unsettled market contract does not include, where he acts as agent, rights or liabilities of his arising out of the relationship of principal and agent.'.

No. 179, in page 288, line 32, leave out paragraph 14 and insert—

'14.—(1) The rules of the clearing house must provide that, in the event of a default, margin provided by the defaulter for his own account is not to be applied to meet a shortfall on a client account.

(2) This is without prejudice to the requirements of any relevant regulations under section 55 of the Financial Services Act 1986 (clients' money).'.

No. 180, in page 289, line 3, leave out paragraph 15 and insert—
`15.—(1) The rules and practices of the body, together with the law of the country in which the body's head office is situated, must be such as to provide adequate procedures for dealing with the default of persons party to market contracts connected with the body.

(2) The reference in sub-paragraph (1) to default is to a person being unable to meet his obligations.'.—[Mr. Redwood.]

Clause 148

MODIFICATIONS OF THE LAW OF INSOLVENCY

Amendment made: No. 181, in page 163, line 31, at end insert—
'(1A) So far as those provisions relate to insolvency proceedings in respect of a person other than a defaulter, they apply in relation to—
(a) proceedings in respect of a member or designated non-member of a recognised investment exchange or a member of a recognised clearing house, and
(b) proceedings in respect of a party to a market contract begun after a recognised investment exchange or recognised clearing house has taken action under its default rules in relation to a person party to the contract as principal,
but not in relation to any other insolvency proceedings, notwithstanding that rights or liabilities arising from market contracts fall to be dealt with in the proceedings.

(1B) The reference in subsection (1A)(b) to the beginning of insolvency proceedings is to—
(a) the presentation of a bankruptcy petition or a petition for sequestration of a person's estate, or
(b) the presentation of a petition for an administration order or a winding-up petition or the passing of a resolution for voluntary winding up, or
(c) the appointment of an administrative receiver.'.—[Mr. Redwood.]

Clause 149

PROCEEDINGS OF EXCHANGE OR CLEARING HOUSE TAKE PRECEDENCE OVER INSOLVENCY PROCEDURES

Amendments made: No. 182, in page 164, line 5, leave out from '1986' to 'shall' in line 6 and insert 'or the Bankruptcy (Scotland) Act 1985'.

No. 183, in page 164, leave out lines 13 to 15 and insert—
'This does not prevent a relevant office-holder from afterwards seeking to recover any amount under section 153(4) or 154(3) or prevent the court from afterwards making any such order or decree as is mentioned in section 155(1) or (2) (but subject to subsections (3) and (4) of that section).'.—(Mr. Redwood.]

Clause 151

SUPPLEMENTARY PROVISIONS AS TO DEFAULT PROCEEDINGS

Amendments made: No. 184, in page 165, line 36, leave out 'or have been pending' and insert
'pending or could be taken, or have been or could have been taken.'.

No. 185, in page 165, line 39, leave out
`the Bankruptcy (Scotland) Act 1985'
and insert
'any rule of law in Scotland to the like effect as the said section 285, in the Bankruptcy (Scotland) Act 1985 or in the Debtors (Scotland) Act 1987 as to the effect of sequestration,'.—[Mr.
Redwood.]

Clause 153

NET SUM PAYABLE ON COMPLETION OF DEFAULT PROCEEDINGS

Amendments made: No. 186, in page 166, line 21, leave out from 'upon' to `to' and insert—
`proceedings under its default rules being duly completed in accordance with this Part,'.

No. 187, in page 166, line 34, leave out '129' and insert '247'.

No. 188, in page 166, line 47, leave out subsection (4)
and insert—
'(4) However, where (or to the extent that) a sum is taken into account by virtue of subsection (2)(b) or (3)(b) which arises from a contract entered into at a time when the creditor had notice—
(a) that a bankruptcy petition or, in Scotland, a petition for sequestration was pending, or
(b) that a meeting of creditors had been summoned under section 98 of the Insolvency Act 1986 or that a winding-up petition was pending,
the value of any profit to him arising from the sum being so taken into account (or being so taken into account to that extent) is recoverable from him by the relevant office-holder unless the court directs otherwise.

(4A) Subsection (4) does not apply in relation to a sum arising from a contract effected under the default rules of a recognised investment exchange or recognised clearing house.'.—[Mr. Redwood.]

Clause 154

DISCLAIMER OF PROPERTY, RESCISSION OF CONTRACTS, &C.

Amendments made: No. 189, in page 167, line 23, leave out 'and 315' and insert 315 and 345'.

No. 190, in page 167, line 24, at end insert—
'(1A) In Scotland, a permanent trustee on the sequestrated estate of a defaulter or a liquidator is bound by any market contract to which that defaulter is a party and by any contract as is mentioned in subsection (1)(b) above notwithstanding section 42 of the Bankruptcy (Scotland) Act 1985 or any rule of law to the like effect applying in liquidations.'.

No. 191, in page 167, line 27, after 'petition)' insert
', and section 32(8) of the Bankruptcy (Scotland) Act 1985 (effect of dealing with debtor relating to estate vested in permanent trustee),'.

No. 192, in page 167, line 38, leave out subsection (3) and insert—
'(3) However, where—
(a) a market contract is entered into by a person who has notice that a petition has been presented for the winding up or bankruptcy or sequestration of the estate of the other party to the contract, or

(b) margin in relation to a market contract is accepted by a person who has notice that such a petition has been presented in relation to the person by whom or on whose behalf the margin is provided,
the value of any profit to him arising from the contract or, as the case may be, the amount or value of the margin is recoverable from him by the relevant office-holder unless the court directs otherwise.

(3A) Subsection (3)(a) does not apply where the person entering into the contract is a recognised investment exchange or recognised clearing house acting in accordance with its rules, or where the contract is effected under the default rules of such an exchange or clearing house; but subsection (3)(b) applies in relation to the provision of margin in relation to such a contract.'.—[Mr. Redwood.]

Clause 155

ADJUSTMENT OF PRIOR TRANSACTIONS

Amendments made: No. 193, in page 168, line 1, leave out 'market contract' and insert 'transaction to which this section applies'.

No. 194, in page 168, leave out lines 7 to 10.

No. 195, in page 168, line 11, leave out 'a market contract' and insert 'any such transaction'.

No. 196, in page 168, leave out lines 18 to 20.

No. 197, in page 168, line 21, leave out subsection (3) and insert—
'(3) This section applies to—
(a) a market contract to which a recognised investment exchange or recognised clearing house is a party or which is entered into under its default rules, and
(b) a disposition of property in pursuance of such a market contract.

(4) Where margin is provided in relation to a market contract and (by virtue of subsection (3)(a) or otherwise) no such order or decree as is mentioned in subsection (1) or (2) has been, or could be, made in relation to that contract, this section applies to—
(a) the provision of the margin,
(b) any contract effected by the exchange or clearing house in question for the purpose of realising the property provided as margin, and
(c) any disposition of property in accordance with the rules of the exchange or clearing house as to the application of property provided as margin.'.

No. 198, in page 168, line 31, leave out Clause 156.—[Mr. Redwood]

Clause 157

DELEGATIONS OF FUNCTIONS TO DESIGNATED AGENCY

Amendments made: No. 199, in page 169, line 24, leave out 'Part' and insert 'section'.

No. 200, in page 169, line 30, leave out 'Part' and insert 'section'.

No. 201, in page 169, line 32, [Clause 157] at end insert—
'(3) The Secretary of State may—
(a) in the circumstances mentioned in subsection (3), (4) or (5) of section 115 of the Financial Services Act 1986, or
(b) if it appears to him that a designated agency is unable or unwilling to discharge all or any of the functions under this Part which have been transferred to it,
make an order under that section resuming all functions under this Part which have been transferred to the agency.

This does not affect his power to make an order under subsection (1) or (2) of that section with respect to such functions.'.—[Mr. Redwood.]

Clause 158

SUPPLEMENTARY PROVISIONS

Amendment made: No. 202, in page 170, line 8, at end
insert—
'(4) The references in sections 119 and 121 of the Financial Services Act 1986 (competition) to what is necessary for the protection of investors shall be construed as including references to what is necessary for the purposes of this Part.
(5) Section 204 of the Financial Services Act 1986 (service of notices) applies in relation to a notice, direction or other document required or authorised by or under this Part to be given to or served on any person other than the Secretary of State.'.—[Mr. Redwood]

Clause 159

CERTAIN OVERSEAS EXCHANGES AND CLEARING HOUSES

Amendments made: No. 203, in page 170, line 13, leave out from beginning to 'in' in line 15 and insert 'is approved by him'.

No. 204, in page 170, line 20, leave out subsections (2) and (3) and insert—
'(2) The Secretary of State shall not approve an overseas investment exchange or clearing house unless he is satisfied—
(a) that the rules and practices of the body, together with the law of the country in which the body's head office is situated, provide adequate procedures for dealing with the default of persons party to contracts connected with the body, and
(b) that it is otherwise appropriate to approve the body.

(3) The reference in subsection (2)(a) to default is to a person being unable to meet his obligations.'.

No. 205, in page 170, line 33, leave out 'regulations may' and insert
'Secretary of State may make regulations which'.

No. 206, in page 170, line 38. at end insert
'; and different provision may be made with respect to different bodies or descriptions of body.'.

No. 207, in page 170, line 38, at end insert—
'(6) Where the regulations apply any provisions of the Financial Services Act 1986, they may provide that those provisions apply with such exceptions, additions and adaptations as appear to the Secretary of State to be necessary or expedient.'.

No. 208, in page 170, line 39, leave out Clause 160.—[Mr. Redwood.]

Clause 161

MARKET CHARGES

Amendments made: No. 209, in page 171, leave out line 22 and insert
'In this Part "market charge" means a charge'.

No. 210, in page 171, leave out line 35.

No. 211, in page 171, line 37, leave out from 'purposes' to end of line 39 and insert
`it is a "market charge" so far as it has effect for the specified purposes.'.

No. 212, in page 172, line 4, leave out `sections 162 and 163' and insert 'this Part'.

No. 213, in page 172, line 5, at end insert—
'(4A) The regulations may provide that a charge shall or shall not be treated as a market charge if or to the extent that it secures obligations of a specified description, is a charge over property of a specified description or contains provisions of a specified description.'.

No. 214, in page 172, line 6, leave out subsection (5) and insert—
'(5) Before making regulations under this section relation to charges granted in favour of a person within subsection (1)(c), the Secretary of State shall consult the Treasury and the Bank of England.'.—[Mr. Redwood.]

Clause 162

MODIFICATIONS OF THE LAW OF INSOLVENCY

Amendment made: No. 215, in page 172, line 25, leave out subsection (5) and insert—
'(5) Before making regulations under this section in relation to charges granted in favour of a person within section 161(1)(c), the Secretary of State shall consult the Treasury and the Bank of England.'.—[Mr. Redwood.]

Clause 163

ADMINISTRATION ORDERS, &C.

Amendments made: No. 216, in page 172, line 29, leave out subsections (1) to (3) and insert—
`(1) The following provisions of the Insolvency Act 1986 (which relate to administration orders and administrators) do not apply in relation to a market charge—

(a) sections 10(1)(b) and 11(3)(c) (restriction on enforcement of security while petition for administration order pending or order in force), and
(b) section 15(1) and (2) (power of administrator to deal with charged property);
and section 11(2) of that Act (receiver to vacate office when so required by administrator) does not apply to a receiver appointed under a market charge.

(2) However, where a market charge falls to be enforced after an administration order has been made or a petition for an administration order has been presented, and there exists another charge over some or all of the same property ranking in priority to or pari passu with the market charge, the court may order that there shall be taken after enforcement of the market charge such steps as the court may direct for the purpose of ensuring that the chargee under the other charge is not prejudiced by the enforcement of the market charge.

(3) The following provisions of the Insolvency Act 1986 (which relate to the powers of receivers) to not apply in relation to a market charge—

(a) section 43 (power of administrative receiver to dispose of charged property), and
(b) section 61 (power of receiver in Scotland to dispose of an interest in property).'.

No. 217, in page 172, line 37, leave out subsections (4) and (5) and insert—
'(4) Sections 127 and 284 of the Insolvency Act 1986 (avoidance of property dispositions effected after commencement of winding up or presentation of bankruptcy petition), and section 32(8) of the Bankruptcy (Scotland) Act 1985 (effect of dealing with debtor relating to estate vested in permanent trustee), do not apply to a disposition of property as a result of which the property becomes subject to a market charge or any transaction pursuant to which that disposition is made.
(5) However, if a person (other than the chargee under the market charge) who is party to a disposition mentioned in subsection (4) has notice at the time of the disposition that a petition has been presented for the winding up or bankruptcy or sequestration of the estate of the party making the disposition, the value of any profit to him arising from the disposition is recoverable from him by the relevant office-holder unless the court directs otherwise.'.

No. 218, in page 173, line 6, at end insert—
'(7) In a case falling within both subsection (4) above (as a disposition of property as a result of which the property becomes subject to a market charge) and section 154(2) (as the provision of margin in relation to a market contract), section 154(3) applies with respect to the recovery of the amount or value of the margin and subsection (5) above does not apply.'.—[Mr. Redwood.]

Clause 164

POWER TO MAKE PROVISION ABOUT CERTAIN OTHER CHARGES

Amendment made: No. 219, in page 173, line 12, leave out subsection (2) and insert—
'(2) The regulations may specify any description of charge granted in favour of—
(a) a body approved under section 159 (certain overseas exchanges and clearing houses),
(b) a person included in the list maintained by the Bank of England for the purposes of section (Certain money market institutions) (certain money market institutions),
(c) the Bank of England,
(d) an authorised person within the meaning of the Financial Services Act 1986, or
(e) an international securities self-regulating organisation within the meaning of that Act,
for the purpose of securing debts or liabilities arising in connection with or as a result of the settlement of contracts or the transfer of assets, rights or interests on a financial market.

(2A) The regulations may specify any description of charge granted for that purpose in favour of any other person in connection with exchange facilities or clearing services provided by a recognised investment exchange or recognised clearing house or by any such body, person, authority or organisation as is mentioned in subsection (2).

(2B) Where a charge is granted partly for the purpose specified in subsection (2) and partly for other purposes, the power conferred by this section is exercisable in relation to the charge so far as it has effect for the purpose.'.

No. 220, in page 173, line 32, leave out subsections (4) and (5) and insert—
'(4) Before making regulations under this section relating to a description of charges defined by reference to their being granted—
(a) in favour of a person included in the list maintained by the Bank of England for the purposes of section (Certain money market institutions), or in connection with exchange facilities or clearing services provided by a person included in that list, or
(b) in favour of the Bank of England, or in connection with settlement arrangements provided by the Bank, the Secretary of State shall consult the Treasury and the Bank of England.

(5) Regulations under this section may provide that they apply or do not apply to a charge if or to the extent that it secures obligations of a specified description, is a charge over property of a specified description or contains provisions of a specified description.'.—[Mr. Redwood.]

Clause 165

APPLICATION OF MARGIN NOT AFFECIED BY SUBSEQUENT INTERESTS

Amendment made: No. 221, in page 173, line 41, leave out Clause 165.—[Mr. Redwood.]

Clause 167

PROCEEDINGS AGAINST MARKET PROPERTY BY UNSECURED CREDITORS

Amendment made: No. 222, in page 174, line 8, leave out from 'property' to 'margin' and insert
'(other than land) is held by a recognised investment exchange or recognised clearing house as'.—[Mr. Redwood.]

Clause 168

POWER TO APPLY PROVISIONS TO OTHER CASES

Amendment made: No. 223, in page 174, line 31, leave out from beginning to third 'to' in line 37 and insert—

'(a) section 159, (Certain money market institutions) or (Settlement arrangements provided by the Bank of England) (power to extend provisions relating to market contracts), or
(b) section 164 (power to extend provisions relating to market charges),
includes power to apply sections (Application of margin not affected by certain other interests), (Priority of floating market charge over subsequent charges), 166 and l67'.—[Mr. Redwood.]

Clause 169

POWERS OF COURT IN RELATION TO CERTAIN PROCEEDINGS BEGUN BEFORE COMMENCEMENT

Amendments made: No. 224, in page 175, line 8, leave out 'Part' and insert 'section'.

No. 225, in page 175, line 29, leave out 'Part' and insert `section'.

No. 226, in page 175, line 35, leave out 'this Part specified below' and insert
'Schedule ( Financial markets and insolvency: provisions applying to pre-commencement cases)'.

No. 227, in page 175, line 37, leave out subsection (5) and insert—
(5) The provisions of that Schedule ("the relevant provisions") reproduce the effect of certain provisions of this Part as they appeared in the Bill for this Act as introduced into the House of Lords and published on that date.'.—[Mr. Redwood.]

Clause 170

INSOLVENCY PROCEEDINGS IN OTHER JURISDICTIONS

Amendments made: No. 228, in page 177, line 3, leave out from beginning to 'by' in line 4 and insert
'insofar as the making of the order or the doing of the act would be prohibited in the case of a court in the United Kingdom or a relevant office-holder'.

No. 229, in page 177, line 4, at end insert—
Subsection (2) does not affect the recognition or enforcement of a judgment required to be recognised or enforced under or by virtue of the Civil Jurisdiction and Judgments Act 1982.'.—[Mr. Redwood.]

Clause 171

INDEMNITY FOR CERTAIN ACTS, &C.

Amendment made: No. 230, in page 177, line 19, after 'servant' insert
'or member of the governing body'.—[Mr. Redwood.]

Clause 173

MEANING OF "DEFAULT RULES" AND RELATED EXPRESSIONS

Amendments made: No. 231, in page 177, line 44, leave out from beginning to 'unable' and insert
'for the taking of action in the event of a person appearing to be'.

No. 232, in page 178, line 8, at end insert—
If an exchange or clearing house takes action under its default rules in respect of a person, all subsequent proceedings under its rules for the purposes of or in connection with the settlement of market contracts to which the defaulter is a party shall be treated as done under its default rules.'.—[Mr. Redwood.]

Clause 174

MEANING OF "RELEVANT OFFICEHOLDER"

Amendment made: No. 233, in page 178, line 22, leave
out subsection (2) and insert—
'(2) In subsection (1)(b) "company" means any company, society, association, partnership or other body which may be wound up under the Insolvency Act 1986.'.

Clause 175

MINOR DEFINITIONS

Amendments made: No. 234, in page 178, line 31, at end insert—
'administrative receiver has the meaning given by section 251 of the Insolvency Act 1986;'.

No. 235, in page 178, line 35, at end insert—
'interin trustee" and "permanent trustee" have the same
meaning as in the Bankruptcy (Scotland) Act 1985;'.

No. 236, in page 178, line 46, at end insert—
'(1A) References in this Part to settlement in relation to a market contract are to the discharge of the rights and liabilities of the parties to the contract, whether by performance, compromise or otherwise.
(1B) In this part the expressions "margin" and "cover for margin" have the same meaning.'.

No. 237, in page 179, line 2, at end insert—
'(2A) For the purposes of this Part a person shall be taken to have notice of a matter if he deliberately failed to make enquiries as to that matter in circumstances in which a reasonable and honest person would have done so.
This does not apply for the purposes of a provision requiring "actual notice".'

No. 238, in page 179, line 3, leave out subsection (3).

No. 239, in page 179, line 8, at end insert
and in relation to a building society references to insolvency law or to any provision of the Insolvency Act 1986 are to that law or provision as modified by the Building Societies Act 1986.'.—Mr. Redwood.]

Clause 176

INDEX OF DEFINED EXPRESSIONS

Amendments made: No. 240, in page 179, line 17, at end insert—


'administrative receiver
section 175(1)'.

No. 241, in page 179, line 19, at end insert—


`cover for margin
section 175(1B)'.

No. 242, in page 179, line 23, at end insert—


'interim trustee
section 175(1) and (5)(b)'

No. 243, in page 179, line 25, at end insert—


'margin
section 175(1B)'.

No. 244, in page 179, line 27, at end insert—


'notice
section 175(2A)'.

No. 245, in page 179, line 30, column 2, leave out '175(3)' and insert

'(Construction of references to parties to market contract)'.

No. 246, in page 179, line 30, at end insert—


'permanent trustee
section 175(1) and (5)(b)'

No. 247, in page 179, line 34, at end insert—


'settlement and related expressions (in relation to a market contract)
section 175(1A)'—[Mr. Redwood.]

Amendment made: No. 248, new schedule—

'FINANCIAL MARKETS AND INSOLVENCY: PROVISIONS APPLYING TO PRE-COMMENCEMENT CASES

Introductory

1. The provisions of this Schedule have effect for the purpose of safeguarding the operation of certain financial markets—

(a) in the event of the insolvency, winding-up or default of a person party to transactions in the market (paragraphs 2 to 8), and
(b) as regards the effectiveness or enforcement of certain charges given to secure obligations in connection with such transactions (paragraph 9 to 12).

Recognised investment exchanges and clearing houses

2.—(1) This Schedule applies to the following descriptions of contract connected with a recognised investment exchange or recognised clearing house.

The contracts are referred to in this Schedule as "market contracts".

(2) In relation to a recognised investment exchange, this Schedule applies to—
(a) contracts entered into by a member or designated non-member of the exchange which are—

(i) made on or otherwise subject to the rules of the exchange,
(ii) on terms expressed to be as traded on the exchange, or
(iii) on the same terms as those on which an equivalent contract would be made on the exchange; and

(b) contracts subject to the rules of the exchange entered into by the exchange for the purposes of or in connection with the provision of clearing services.

A "designated non-member" means a person in respect of whom action may be taken under the default rules of the exchange but who is not a member of the exchange.

(3) In relation to a recognised clearing house, this Schedule applies to contracts subject to the rules of the clearing house entered into by the clearing house for the purposes of or in connection with the provision of clearing services for a recognised investment exchange.

This includes contracts effected under or in consequence of action taken by the clearing house under its default rules.

3. The general law of insolvency has effect in relation to market contracts, and action taken under the rules of a recognised investment exchange or recognised clearing house with respect to such contracts, subject to the following provisions of this Schedule.

4.—(1) None of the following shall be regarded as to any extent invalid at law on the ground of inconsistency with the law relating to the distribution of the assets of a person on bankruptcy, winding-up sequestration, or in the administration of an insolvent estate—

(a) a market contract,
(a) the rules of a recognised investment exchange or recognised clearing house as to the settlement of market contracts,
(c) the default rules of a recognised investment exchange or recognised clearing house.

(2) The powers of a relevant office-holder in his capacity as such, and the powers of the court under the Insolvency Act 1986 or the Bankruptcy (Scotland) Act 1985, shall not be exercised in such a way as to prevent or interfere with—

(a) the settlement of a market contract in accordance with the rules of a recognised investment exchange or recognised clearing house,
(b) any action taken under the default rules of such an exchange or clearing house.

(3) Nothing in the following provisions of this Schedule shall be construed as affecting the generality of sub-paragraph (2).

(4) A debt or other liability arising out of a market contract which is the subject of default proceedings may not be proved in a winding-up or bankruptcy, or in Scotland claimed in a winding-up or sequestration, until the completion of the default proceedings.

A debt or other liability which by virtue of this sub paragraph may not be proved or claimed shall not be taken into account for the purposes of any set-off until the completion of the default proceedings.

5.—(1) A liquidator or trustee of a defaulter shall not—

(a) declare or pay any dividend to the creditors, or
(b) return any capital to contributories,
unless he has retained what he reasonably considers to be an adequate reserve in respect of any claims arising as a result of the default proceedings of the exchange or clearing house concerned.

(2) Nothing in sections 11(3), 130 or 285 of the Insolvency Act 1986 (which restrict the taking of certain legal proceedings and other steps), and nothing in the Bankruptcy (Scotland) Act 1985, shall affect any action taken by an exchange or clearing house for the purpose of its default proceedings.

6.—(1) The following provisions apply with respect to the net sum certified by a recognised investment exchange or recognised clearing house, upon the completion of proceedings under its default rules, to be payable by or to a defaulter.

(2) If, in England and Wales, a backruptcy or winding-up order has been made, or a resolution for voluntary winding-up has been passed, the debt—

(a) is provable in the bankruptcy or winding-up or, as the case may be, is payable to the relevant office-holder, and
(b) shall be taken into account, where appropriate, under section 323 of the Insolvency Act 1986 (mutual dealings and set-off) or the corresponding provision applicable in the case of a winding-up,
in the same way as a debt due before the commencement of the bankruptcy or winding-up.

(3) If, in Scotland, an award of sequestration or a winding-up order has been made, or a resolution for voluntary winding-up has been passed, the debt—

(a) may be claimed in the sequestration or winding-up or, as the case may be, is payable to the relevant officer-holder, and
(b) shall be taken into account for the purposes of any rule of law relating to compensation or set-off applicable in sequestration or winding-up,
in the same way as a debt due before the date of sequestration (within the meaning of section 73(1) of the Bankruptcy (Scotland) Act 1985) or the commencement of the winding-up.

7.—(1) Sections 178, 186, 315 and 345 of the Insolvency Act 1986 (power to disclaim onerous property and court's power to order rescission of contracts, &c.) do not apply in relation to—

(a) a market contract, or
a contract effected by the exchange or clearing house for the purpose of realising property provided as margin in relation to market contracts.

In the application of this sub-paragraph in Scotland, the reference to sections 178 and 315 shall be construed as a reference to any rule of law having the like effect as those sections.

(2) Sections 127 and 284 of the Insolvency Act 1986 (avoidance of property dispositions effected after commencement of winding-up or presentation of backruptcy petition) do not apply to—

(a) a market contract, or any disposition of property in pursuance of such a contract,
(b) the provision of margin in relation to market contracts,
(c) a contract effected by the exchange or clearing house for the purpose of realising property provided as margin in relation to a market contract, or any disposition of property in pursuance of such a contract, or
(d) any disposition of property in accordance with the rules of the exchange or clearing house as to the application of property provided as margin.

(3) However, if a person enters into a market contract knowing that a petition has been presented for the winding-up or bankruptcy of the other party to the contract, the value of

any profit or benefit to him arising from the contract is recoverable from him by the relevant office-holder unless the court directs otherwise.

Any sum recoverable by virtue of sub-paragraph (3) has the same priority, in the event of the insolvency of the person from whom it is due, as if it were secured by a fixed charge.

8.—(1) No order shall be made in relation to a market contract under—

(a) section 238 or 339 of the Insolvency Act 1986 (transactions at an under-value),
(b) section 239 or 340 of that Act (preferences), or
(c) section 423 of that Act (transactions defrauding creditors),
unless the court is satisfied that the person in favour of whom the contract was made knew at the time he entered into it that it was at an under-value (within the meaning of the relevant provision) or, as the case may be, that a preference was being given.

(2) As respects Scotland, no decree shall be granted in relation to a market contract—

(a) under section 34 or 36 of the Bankruptcy (Scotland) Act 1985 or section 242 or 243 of the Insolvency Act 1986 (gratuitous alienations and unfair preferences), or
(b) at common law,
unless the court is satisfied that the person with whom the contract was made knew at the time he entered into it that it was challengeable under any of the provisions mentioned in paragraph (a) or at common law.

(3) Sub-paragraphs (1) and (2) apply in relation to—

(a) a disposition of property in pursuance of a market contract,
(b) the provision of margin in relation to market contracts,
(c) a contract effected by a recognised investment exchange or recognised clearing house for the purpose of realising property provided as margin, or
(d) a disposition of property in accordance with the rules of the exchange or clearing house as to the application of property provided as a margin,
as they apply in relation to the making of a market contract.

Market charges

9.—(1) The charges to which paragraphs 10 to 12 apply are charges, whether fixed or floating, granted—

(a) in favour of a recognised investment exchange, for the purpose of securing debts or liabilities arising in connection with the settlement of market contracts,
(b) in favour of a recognised clearing house, for the purpose of securing debts or liabilities arising in connection with their ensuring the performance of market contracts, or
(c) in favour a person who agrees to make payments as a result of the transfer of specified securities made through the medium of a computer-based system established by the Bank of England and The Stock Exchange, for the purpose of securing debts or liabilities of the transferee arising in connection with the payments.

Those charges are referred to in this Schedule as "market charges".

(2) Where a charge is granted partly for purposes specified in sub-paragraph (1)(a), (b) or (c) and partly for other purposes, paragraphs 10 to 12 apply to it so far as it has effect for the specified purposes; and the expression "market charge" shall be construed accordingly.

(3) In this paragraph and paragraphs 10 to 12—
charge" means any form of security, including a mortgage and, in Scotland, a heritable security; and
specified securities" means securities for the time being specified in the list in Schedule 1 to the Stock Transfer Act 1982, and includes any right to such securities.

10. The general law of insolvency has effect in relation to market charges and action taken in enforcing them subject to the following provisions of this Schedule.

11.—(1) Sections 10(1)(b) and 11(3)(c) of the Insolvency Act 1986 (no enforcement of security while petition for administration order pending or order in force) do not apply to a market charge.

(2) Section 11(2) of that Act (receiver to vacate office when so required by administrator) does not apply to a receiver appointed under a market charge.

(3) Section 15(1) and (2) of that Act (administrator's power to deal with charged property) do not apply to a market charge.

(4) Sections 127 and 284 of that Act (avoidance of property dispositions effected after commencement of winding up or presentation of bankruptcy petition) do not apply to—

(a) a disposition of property as a result of which the property becomes subject to a market charge, or any transaction pursuant to which that disposition is made, or
(b) any disposition of property made in enforcing a market charge.

(5) However, if a person (other than the chargee under the market charge) who is a party to a disposition mentioned in sub-paragraph (4)(a) knows at the time of the disposition that a petition has been presented for the winding-up or bankruptcy of the party making the disposition, the value of any profit or benefit to him arising from the disposition is recoverable from him by the relevant office-holder unless the court directs otherwise.

(6) Any sum recoverable by virtue of sub-paragraph (5) has the same priority, in the event of the insolvency of the person from whom it is due, as if it were secured by a fixed charge.

12.—(1) No legal proceedings, execution or other legal process may be commenced or continued, and no distress may be levied against property which is, or becomes, subject to a market charge except with the consent of the person in whose favour the charge was granted or the leave of the court.

(2) The court may give leave subject to such terms as it thinks fit.

(3) Sub-paragraph (1) does not apply to proceedings to enforce any security over, or any equitable interest in, the property.

(4) Sections 10(1)(c), 11(3)(d), 130(3) and 285(3) of the Insolvency Act 1986 (which restrict the taking of certain legal proceedings and other steps) have effect accordingly.

(5) In the application of this paragraph to Scotland, the reference to execution being commenced or continued includes a reference to diligence being carried out or continued, and the reference to distress being levied shall be omitted.

Supplementary provisions

13.—(1) In this Schedule "default rules" means—

(a) in relation to a recognised investment exchange, rules which provide in the event of a member or designated non-member of the exchange appearing to be unable, or likely to become unable, to meet his obligations in respect of one or more market contracts, for the settlement forthwith of all unsettled market contracts to which he is a party as principal, other than those whose performance is ensured by a recognised clearing house;
(b) in relation to a recognised clearing house, rules which provide in the event of a member of the clearing house appearing to be unable, or likely to become unable, to meet his obligations in respect of any market contract, for the closing out of his position in relation to all market contracts to which he is a party.

(2) References in this Schedule to a "defaulter" are to a person in respect of whom action has been taken by a recognised investment exchange or recognised clearing house under its default rules, whether by declaring him to be a defaulter or otherwise; and references in this Schedule to "default" shall be construed accordingly.

(3) In this Schedule "default proceedings" means proceedings taken by a recognised clearing house under its default rules.

14.—(1) The following are relevant office-holders for the purposes of this Schedule—

(a) the official receiver,

(b) any person acting in relation to a company as its liquidator, provisional liquidator, administrator or administrative receiver,
(c) any person acting in relation to an individual (or, in Scotland, a deceased debtor) as his trustee in bankruptcy or interim receiver of his property or as permanent or interim trustee in the sequestration of his estate,
(d) any person acting as administrator (or, in Scotland, as judicial factor) of an insolvent estate of a deceased person.

(2) Sub-paragraph (1)(c) applies in relation to a partnership, and any debtor within the meaning of the Bankruptcy (Scotland) Act 1985, as it applies in relation to an individual.

(3) In this paragraph—
administrative receiver" has the meaning given by section 251 of the Insolvency Act 1986;
company" means a company within the meaning of section 735(1) of the Companies Act 1985 or a company which may be wound up under Part V of the Insolvency Act 1986 (unregistered companies); and
interim trustee" and "permanent trustee" have the same meaning as in the Bankruptcy (Scotland) Act. 1985.

15.—(1) In this Schedule—
clearing house" has the same meaning as in the Financial Services Act 1986;
investment" and "investment exchange" have the same meaning as in the Financial Services Act 1986;
recognised" means recognised under the Financial Services Act 1986;
The Stock Exchange" means The International Stock Exchange of the United Kingdom and the Republic of Ireland Limited.

(2) References in this Schedule to ensuring the performance of a transaction have the same meaning as in the Financial Services Act 1986.

(3) References in this Schedule to a market contract to which a person is a party include, unless the contrary intention appears, contracts to which he is party agent.'.—[Mr. Redwood.]

New clause 13

TAKEOVER PANEL

'.—(1) The Secretary of State shall designate a Takover Panel, (in this Act referred to as "the Panel") for the regulation of takeover bids and other general bids to the holders of securities or the securities of a particular class or classes of any United Kingdom public limited company.

(2) The Secretary of State shall choose the members of the Panel in consultation with the Governor of the Bank of England either as full time members or as a part time members.

(3) The Secretary of State shall publish a Code of Practice setting out general principles relating to the functions of the Panel and the status and terms of office of such members and staff as is considered desirable in the prevailing circumstances.

(4) No appeal shall lie from the final decision of the Panel save that such decision may be subject to judicial review.".'.—[Ms. Quin.]

Brought up, and read the First time.

Ms. Quin: I beg to move, That the clause be read a Second time.
The new clause is along the lines of a new clause tabled in another place when the Bill began its passage though the House. It was also referred to in Standing Committee. The arguments are well known, but we believe that it is an important issue and therefore do not apologise for bringing it to the attention of the House now.
The new clause would put the takeover panel on a statutory footing. We know that the panel is very attached to its present status as a non-statutory body. I know, too, that the director-general of the panel has written to


Members of the Standing Committee making his views clear. Nevertheless, it is interesting that the director-general of the takeover panel acknowledges that our new clause preserves the essential characteristics of the panel's method of working and its freedom from tactical litigations, and we understand the panel's attachment to flexibility. However, the panel has been in existence for 21 years and there is no doubt that economic conditions have changed considerably during that time. That is certainly true of the increase in takeover activity of recent years.
There was an interesting debate on this matter in another place, when it was clear that some of their Lordships who had previously supported the non-statutory panel had become less convinced as time went on. Lord Rippon of Hexham said in an interesting contribution that he did not feel that we had a system in which the interests of shareholders and the public interest were best protected. He was concerned, as were others, about the deterioration of standards in takeover bids, and he referred to the aggressive tactics of some merchant banks which seemingly encourage bids. He was worried, too, by the behaviour of some institutional shareholders who increasingly regard share certificates, in the words of the noble Lord, as
casino chips to be used to secure short-term capital gains rather than long-term investments"—[Official Report, House of Lords, 6 March 1989; Vol. 504, c. 1295.]
Since we have been anxious about the problem of short-termism and the lack of long-term industrial strategy in this country, we have great sympathy with his words.
It was interesting to note that another noble Lord' Lord Lucas of Chilworth, said that he had been swayed by events in the last few years into believing that something stronger and with more force was needed.
In the debate in the other place it was said that a working party of the takeover panel was looking at its operation in regulating takeovers. I do not know whether the working party has reached any conclusions or, if it has, what they are, but it would be interesting to know if it has come to any firm conclusions. Perhaps the Minister could tell us about that.
There is undoubtedly a European Community dimension to all this because of the negotiations presently taking place, of which I know the Minister is aware, about the formulation of the 13th company law directive. We think that some of the matters that concern us would be given statutory force by that directive, although it is obvious that, as negotiations are continuing, the form of the directive is not clear. However, article 6 seems to give the force that interests us.
As I have said, we are not out to destroy the flexibility of the takeover panel but simply to give it the weight, importance and extra effectiveness that we think statute would give it. My hon. Friend the Member for Norwich, South (Mr. Garrett) said in Committee that it is anomalous that the Securities and Investments Board draws its authority from the Secretary of State while the takeover panel does not. The new clause restates our view that the takeover panel should have statutory force.

Mr. Cousins: I agree with my hon. Friend the Member for Gateshead, East (Ms. Quin). With the Financial Services Act 1986, the Government created a mixed economy of regulation in which there are statutory bodies

operating in a way that is not quite free. So far, at any rate, that has proved a successful format. The new clause seeks to put other matters of regulation of financial matters on a similar basis. The Government should be flattered that we recognise and have such a good opinion of the 1986 mixed economy regulation formula.
The present system of regulation is rather inchoate. It is not so much a mixed economy as a car boot sale. In different parts of the system, regulation is achieved on different principles and by different methods. The new clause simply seeks to extend to the work of the takeover panel the same principles and formula of regulation as those applied more narrowly in the more specific financial markets by the Financial Services Act. I hope that the new clause is acceptable to the Government. The fact that we are prepared to extend that formula to other areas should commend itself to the Government.

Mr. Hanley: The hon. Member for Gateshead, East (Ms. Quin) is absolutely right to say that the takeover panel wrote to members of the Standing Committee when this matter was raised earlier. Because of that approach, I decided to look at the takeover panel, to study the way in which it does its work, and to see those who work therein. I do not think that I was suborned by my visit. I came away with a much greater appreciation of the work of the takeover panel and of the people who work in it, especially those on secondment.
The vast majority of the consultants on the takeover panel come from major financial and business institutions. They are extremely dedicated and act independently. In hardly any cases has the takeover panel been accused of anything by any of the parties to the activities that it has helped to regulate, because it is utterly fair. The other reason why it is so successful is that because it is non-statutory, the advice that it gives is not subject to being decided in the courts because it exists within the market by the consent and agreement of all those various parties, which respect it thoroughly.
I ask my hon. Friend the Minister to resist the new clause for the important reason that if the panel were statutory, it would be susceptible to litigation. Then, the parties of a contested takeover, trying to use every tactic available to them, might resort to the courts and perhaps for no other reason than delay for tactical advantage. That would be most undesirable. A company with the resources and the tenacity of a Lonhro could extend the takeover bid for many months. The advice given honestly and independently by the members of the takeover panel and its staff would be put to question. While I am sure that they would be supported in any decision, many takeover bids would be put in jeopardy for the wrong reasons. I ask all my hon. Friends to resist the new clause.

Mr. Nicholas Baker: I have appeared before the takeover panel, and I have found it quick, cheap, efficient and independent. Opposition Members have argued in favour of tidiness and said that they do like such bodies to be regulated by different systems. I am not interested in tidiness for the sake of it in the regulation of companies. I want a system of regulation which works, and this does. It is flexible, and members of the Committee were presented with examples of the different changes that the takeover panel has accommodated in changing its rules. I


will not go over them now, but it is impressive how, in 21 years, the panel has adapted to new problems that have arisen, and new situations that have to be met.
Furthermore, the panel has avoided litigation. I plead guilty to being a lawyer. The hon. Member for Norwich, South (Mr. Garrett) wants more work for lawyers. I came to Parliament to try to reduce the work for lawyers, but I have been unsuccessful. The takeover panel is a good example of how to avoid litigation by being non-statutory and not giving rise to litigation. This is an example of where the self-regulation system works, so let us allow it to do so and resist the new clause.

Mr. Redwood: The hon. Member for Gateshead, East (Ms Quin) provided two of the best reasons why the new clause should be resisted. She agreed that the director-general wants the takeover panel to stay as it is, and she accepted that it is doing good work. She recognised that freedom from tactical litigation is an important part of its method of operation. Its flexibility is what makes it so successful and widely accepted by all those participating in the market place for control and in need of rules and a guiding hand to ensure fair play between the parties. She asked me what had emerged from the panel working party looking at its operations. That work has led to proposals for rule changes which I hope will be welcomed on both sides of the House.
It has been requested that a model section 212 notice of disclosure should be issued, and I am happy to see that happen. It has been suggested that a cash alternative in a bid should be required if a company has bought 10 per cent. of the shares of the target company in the previous 12 months, rather than 15 per cent. That may help hon. Members who have been worried about certain kinds of bid using paper rather than cash.
There is another requirement that there should be no purchase above 30 per cent. of the shares until it is clear that the Secretary of State does not intend to refer the matter to the MMC. This shows the takeover panel at work responding to changing conditions, which it can do speedily and flexibly as a result of its structure. I am grateful to my hon. Friends the Members for Richmond and Barnes (Mr. Hanley) and for Dorset, North (Mr. Baker) for urging the House to reject the new clause, and 1 must do the same.
12.15 am
We have a successful panel system. It achieves the important objective of protecting shareholders' interests while maintaining an open and efficient market for takeovers. Compliance with the code is high and the panel continues to exercise authority over those it regulates. It is difficult to understand why we should tinker with a system that operates so effectively. It is not enough to be motivated by a vague desire to establish all regulation in statute. There must be a real and perceived need for improvement before legislation can be justified, and there is no such need in respect of the panel.
Nor do I think that there is a need for the Secretary of State to have a role in appointing the members of the panel. It is already the position that the chairman, two deputy chairmen and one further individual are independent lay members appointed by the Governor of the Bank of England. The remaining member organisations represent the full range of those who have a interest in the proper market conduct of takeovers. We are

continuing to discuss the effect of the takeover directive in Brussels. It would be premature for Parliament to be considering at the same time as the new clause the implementation of the directive as none of us has any idea what exactly the directive will provide. Its existence as a proposal is no argument for legislating before the final text is agreed. We are still at the Council working party stage. There is a long way to go before a satisfactory directive is finally agreed.
The new clause is potentially damaging in the effect that it might have on the status of the panel and the code. That is where I think that the hon. Member for Gateshead, East is in some difficulty. We regard the maintenance of the panel's current relationship with the courts as essential to the proper conduct of takeovers. As the code is not legally binding, the panel can be flexible in the setting and interpretation of its rules. It is also able to make rulings quickly during the course of takeovers. Broadly speaking, the panel is the final arbiter in its rulings. Takeovers cannot be delayed or frustrated through tactical litigation during their progress. The measure of discretion that is available to the panel affords that combination of flexibility and speed which enables it to be successful.

Mr. Cousins: I am trying to follow the Minister's argument. Would he regard the implications of the DTI inspector's report on the County NatWest affair, especially the recommendations for future legislation contained in paragraphs 10.35 and 16.41, as being potentially threatening to the integrity of the takeover panel as he is presenting it this evening?

Mr. Redwood: No, I do not find it so threatening. I think that the panel has proved its worth in many situations in recent years.
I believe that the new clause could jeopardise the satisfactory operation of the panel and could lead to some legal difficulties. I urge the House to reject it.

Ms. Quin: At least one positive result of tabling the new clause and discussing the issue in Committee was to encourage the hon. Member for Richmond and Barnes (Mr. Hanley) to visit the takeover panel.
In tabling the new clause we were aware of the danger of promoting too much litigation, and I felt that we had responded to it, especially when I had introduced the clause to the House. We do not believe that everything in the garden is rosy in the way that has been described by the Minister. The fact that the panel has been carrying out an examination and has recommended some changes shows that certain changes were felt to be necessary. I refer again to the debate which took place in another place, during which specific concerns were expressed about the panel's ability to deal with takeovers in the special climate that we have seen develop over the past few years. For those reasons, I shall press the new clause to a Division.

Question put, That the clause be read a Second time:—

The House divided: Ayes 22, Noes 115.

Division No. 358]
[12.19 am


AYES


Barnes, Harry (Derbyshire NE)
Fields, Terry (L'pool B G'n)


Battle, John
Foster, Derek


Bennett, A. F. (D'nt'n &amp; R'dish)
Garrett, John (Norwich South)


Carlile, Alex (Mont'g)
Hughes, John (Coventry NE)


Clay, Bob
Jones, Martyn (Clwyd S W)


Cousins, Jim
Michie, Bill (Sheffield Heeley)


Cryer, Bob
Nellist, Dave


Dixon, Don
Powell, Ray (Ogmore)






Quin, Ms Joyce
Welsh, Michael (Doncaster N)


Ross, Ernie (Dundee W)



Skinner, Dennis
Tellers for the Ayes:


Steel, Rt Hon David
Mr. Frank Haynes and


Wareing, Robert N.
Mr. Alan Meale.




NOES


Alexander, Richard
Heathcoat-Amory, David


Amess, David
Howarth, G. (Cannock &amp; B'wd)


Amos, Alan
Hughes, Robert G. (Harrow W)


Arbuthnot, James
Hunt, Sir John (Ravensbourne)


Arnold, Jacques (Gravesham)
Hunter, Andrew


Atkinson, David
Irvine, Michael


Baker, Nicholas (Dorset N)
Jack, Michael


Bennett, Nicholas (Pembroke)
Janman, Tim


Boswell, Tim
Johnson Smith, Sir Geoffrey


Bowden, A (Brighton K'pto'n)
Kirkhope, Timothy


Bowis, John
Knapman, Roger


Brazier, Julian
Knowles, Michael


Brooke, Rt Hon Peter
Lord, Michael


Brown, Michael (Brigg &amp; Cl't's)
Maclean, David


Browne, John (Winchester)
McNair-Wilson, Sir Patrick


Burns, Simon
Malins, Humfrey


Burt, Alistair
Mans, Keith


Butterfill, John
Martin, David (Portsmouth S)


Carlisle, John, (Luton N)
Maxwell-Hyslop, Robin


Carlisle, Kenneth (Lincoln)
Meyer, Sir Anthony


Carrington, Matthew
Mills, Iain


Carttiss, Michael
Mitchell, Sir David


Cash, William
Morris, M (N'hampton S)


Channon, Rt Hon Paul
Nelson, Anthony


Chapman, Sydney
Neubert, Michael


Chope, Christopher
Norris, Steve


Clark, Dr Michael (Rochford)
Onslow, Rt Hon Cranley


Clark, Sir W. (Croydon S)
Paice, James


Clarke, Rt Hon K. (Rushcliffe)
Pattie, Rt Hon Sir Geoffrey


Conway, Derek
Peacock, Mrs Elizabeth


Coombs, Anthony (Wyre F'rest)
Porter, David (Waveney)


Cran, James
Powell, William (Corby)


Davis, David (Boothferry)
Redwood, John


Day, Stephen
Ridley, Rt Hon Nicholas


Dorrell, Stephen
Sackville, Hon Tom


Dover, Den
Smith, Tim (Beaconsfield)


Dunn, Bob
Soames, Hon Nicholas


Durant, Tony
Steen, Anthony


Fallon, Michael
Stern, Michael


Favell, Tony
Taylor, John M (Solihull)


Fenner, Dame Peggy
Taylor, Teddy (S'end E)


Forsyth, Michael (Stirling)
Thompson, D. (Calder Valley)


Forth, Eric
Thurnham, Peter


Fox, Sir Marcus
Townsend, Cyril D. (B'heath)


Freeman, Roger
Twinn, Dr Ian


French, Douglas
Waddington, Rt Hon David


Garel-Jones, Tristan
Walden, George


Gill, Christopher
Waller, Gary


Glyn, Dr Alan
Ward, John


Goodlad, Alastair
Wardle, Charles (Bexhill)


Goodson-Wickes, Dr Charles
Warren, Kenneth


Greenway, John (Ryedale)
Watts, John


Gregory, Conal
Wheeler, John


Griffiths, Peter (Portsmouth N)
Widdecombe, Ann


Hague, William
Wood, Timothy


Hamilton, Hon Archie (Epsom)



Hamilton, Neil (Tatton)
Tellers for the Noes:


Hanley, Jeremy
Mr. Greg Knight and


Harris, David
Mr. Irvine Patnick.


Hayward, Robert

Question accordingly negatived.

New Clause 51

AMENDMENT OF FINANCIAL SERVICES ACT 1986

In Chapter V of part 1 of the Financial Services Act 1986 (conduct of investment business) after section 48(2)(1) insert
(m) requiring a person to whom the rules apply to register in a specified manner all individuals employed by him, or by his appointed representative, carrying on or holding themselves out as carrying on investment business of a kind specified

in the rules;
(n) establishing conditions for entry of an individual in a register established in pursuance of subsection (m) above and in particular specified tests of competence or educational qualification."—[Sir William Clark.)

Brought up, and read the First time.

Sir William Clark: I beg to move, That the clause be read a Second time.
I shall not detain the House for long. The new clause has two objectives. It seeks first that the Securities and Investments Board should have the power to maintain a register of all those in the financial advising world, and secondly, that the SIB should be able to lay down conditions as to how and when those names should be placed on the register. That could be by a competence test or by educational qualification. The SIB may be inhibited from taking the lead, so I suggest that we should alter the Companies Bill to remind the SIB that it can take such a lead and then it will probably do so.
The background to the new clause, as my hon. Friend will recollect, is that during the early stages of the Financial Services Bill, the SIB and the Marketing of Investments Board organising committee petitioned the Government to include a competence test, but that was refused. Now that FIMBRA is embarking on competence tests and the SIB is also considering its position, the time has come to provide the powers which could be used to set a standard. The designated rules could be used a a vehicle for requiring all appropriate self-regulatory organisations and registered professional bodies to introduce registers and tests. If the Minister cannot give us a categorical assurance tonight, or if the wording of the new clause is somehow defective, I hope that he will give the new clause sympathetic consideration.

Mr. Redwood: I have listened with interest to the arguments presented by my hon. Friend the Member for Croydon, South (Sir W. Clark) in presenting new clause 51, but I believe that the Bill has enough safeguards for investors already in place. The House should remember the substantial degree of control over individuals employed in investment business by the existing powers in the Financial Services Act.
Authorised firms have a clear and direct responsibility for ensuring that their employees are properly selected, trained and supervised. They are also responsible for ensuring that their employees comply with the full panoply of conduct of business rules or risk loss of authorisation or other sanctions. Large firms in which staff tend to specialise or which undertake a variety of activities have to ensure that the only members of their staff who advise the public on investments are those who are fully competent to do so.
The Act provides two other powers. First is the power to obtain information from authorised businesses, self-regulatory organisations and other recognised bodies. That enables the SIB to obtain such information on individuals and other matters as it deems neccessary for investor protection. The recognised bodies are able to obtain information from their members under similar provisions in their own rule books.
The second relevant power is contained in section 59 of the Financial Services Act 1986, under which the SIB can seek an order banning an individual from being employed


in connection with investment business. A list can therefore be kept of all individuals who appear not to be fit and proper persons to engage in such business.
Given the weight that the Act places on the authorisation of businesses and not individuals, and given the array of powers available to ensure that those businesses employ only individuals who are properly selected and trained, I cannot see the advantage to be gained from requiring specific tests of competence.
Passing such a test would never guarantee that an individual was incompetent at that time or in the future any more than the absence of a qualification could be held to disqualify someone with a lifetime's experience who had been giving good service.
I am afraid that I am not convinced that the limited benefits of the additional powers proposed by my hon. Friend would outweigh the burdens that they would place on business.
In the light of that, I hope that my hon. Friend will withdraw new clause 51.

Questions put and negatived.

Clause 177

STATEMENTS OF PRINCIPLE

Mr. Redwood: I beg to move amendment No. 249, in page 180, line 17, after 'not' insert 'of itself.
The amendment clarifies the rights of action of investors in the event that the breach of a principle promulgated by the SIB also involves a breach of the common law.
It is clear that some matters that may be coverred by principles might already have legal consequences under the common law, such as actions for negligence or breach of trust. However, the principles stated in new section 47A(3) are not to give rise to any right of action on the part of an investor or other person affected, nor to invalidate any transaction. It has been pointed out that the clause as currently drafted might be held to extinguish such rights as already existed. That was not the intention, so the amendment makes it clear that any rights that an investor might have at common law in respect of matters covered by these principles are not extinguished.

Amendment agreed to.

Sir William Clark: I beg to move amendment No. 289, in, page 181, line 2, after 'any person' insert,
'subject to the approval of the Secretary of State'.

Mr. Deputy Speaker (Sir Paul Dean): With this, it will he convenient to consider amendment No. 290, in page 181, line 13 after 'authority', insert
'and the Secretary of State'.

Sir William Clark: It is essential that recognised professional bodies avoid any charge of second-class regulation. The misguided attempt to relieve RPBs of the responsibility of complying with the core rules laid down by the SIB give weight to that charge.
I know that RPBs are bound by statute and royal charters, but they must use their best endeavours to comply with the standards sensibly laid down and adopted by self-regulating organisations, and the amendments aim to achieve that.
We must take care, because it would be illogical if some financial advisers were subject to some rules while others were subject to other rules. I hope that my hon. Friend the

Minister will consider the amendments sympathetically, because I believe that the Government should do something about this.

Mr. Redwood: I recognise the genuine concerns that have persuaded my hon. Friend to move the amendments, but I hope to be able to convince him that the action that we propose will meet his concerns.
New section 47A of the Financial Services Act 1986 will give the Secretary of State a power, which it is intended should be transferred to the SIB, to promulgate statements of principle on the conduct required of investment businesses. A breach of such a statement of principle could lead to disciplinary action. New section 47B gives the SIB and SROs a limited power to waive the application of the principles in a particular case if its application would be unduly onerous and if it could be waived without undue risk to investors.
The purpose of the clause is to provide more flexibility in the operation of the Financial Services Act by allowing regulators scope to make provision, the legal effect of which is appropriate for the mischief that they are seeking to control. The clause does not set out the level of detail for which the statements of principle should provide. Under this power, it would be possible for the SIB to make statements of principle which deal in some detail with matters that are currently dealt with in rules under section 48.
If the powers were to be used in that way, I am sure that my hon. Friend would agree that there should be appropriate flexibility to provide for waivers in the closely defined circumstances set out in the clause. However, the board has said that it does not, for the foreseeable future, propose to use the power in this way. It proposes to use it to promulgate up to 12 general principles which are of such a fundamental nature that the use of the waiver would not be appropriate in any circumstances. In the light of that, the Government have decided not to commence new section 47B while the principles take that form.
I hope that my hon. Friend agrees that this is a satisfactory way of dealing with the important problem which he has raised. I understand that the SIB is content with this approach, which is important. I should be grateful if my hon. Friend would withdraw his amendment.

Sir William Clark: Given that reply, for which I am grateful, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 178

RESTRICTION OF RIGHT TO BRING ACTION FOR CONTRAVENTION OF RULES, REGULATIONS, &C.

Mr. Redwood: I beg to move amendment No. 251, in page 182, line 38, leave out from 'body),' to end of line 39 and insert
'after "paragraphs 2 to 25" insert "(except paragraph 22AA)".'.

Mr. Deputy Speaker (Sir Paul Dean): With this, it will be convenient to take amendment No. 254, in schedule 21, page 300, line 43, after '22' insert
'(and after the paragraph inserted by section 178(3))'.

Mr. Redwood: The amendments are purely technical. I commend them to the House.

Amendment agreed to.

Clause 179

APPLICATION OF DESIGNATED RULES AND REGULATIONS TO MEMBERS OF SELF-REGULATING ORGANISATIONS

Mr. Redwood: I beg to move amendment No. 215A, in page 183, line 14, at end insert—
`(3A) It may be provided that, to such extent as may be specified, the designated rules or regulations may not be modified or waived (under section 63B below or section 50) in relation to a member of a recognised self-regulating organisation.
Where such provision is made any modification or waiver previously granted shall cease to have effect, subject to any transitional provision or saving contained in the rules or regulations.'.

Mr. Deputy Speaker: With this it will be convenient to take amendment No. 255, in schedule 21, page 301, line 7, at end insert—
'(3A) It may be provided that, to such extent as may be specified, the designated rules or regulations may not be modified or waived (under paragraph 22B below or section 50) in relation to a member society.
Where such provision is made any modification or waiver previously granted shall cease to have effect, subject to any transitional provision or saving contained in the rules or regulations.'.

Mr Redwood: The amendments are concerned with the extent to which rules which have been designated by the SIB under new section 63A may be waived or modified by an SRO. The Government think that there should be a mechanism by which the majority of these rules may be waived or modified for individual members of the SROs. These rules would be very different from the statements of principle made under new section 47A.
Without the flexibility represented by the power to waive or modify, it would be difficult to make effective use of the power to draft rules which might be designated. It may be appropriate at this stage to stress the important role that the SROs play and will continue to play in the structure established by the Financial Services Act. It is only these organisations that have the experience necessary to make the detailed rules appropriate to their members and to monitor and enforce compliance with those rules.
It is also clear, however, that the unconstrained use of waivers might have the potential to undermine the intention behind this new power, which is to provide a common core of rules which apply essentialy to all SRO members.
I believe that the SROs can be relied upon to use their power to waive or modify designated rules in a responsible way, but I am also conscious that there are likely to be some designated rules to which any modification or waiver might be inappropriate in principle. The amendments recognise that distinction by providing the SIB with the power to specify that certain rules designated under new section 63A may not be waived or modified by an SRO in any circumstances or only in circumstances set out in the rules or regulations.
I stress that I and, I understand, the SIB see this very much as a reserve power. I would expect that, provided SROs exercised their power to waive designated rules with

moderation, there would be no need for the SIB to exercise the power that the amendment gives it. On that basis, I commend the amendment to the House.

Mr. John Garrett: In Committee, we in general opposed the power to waive rules given to SROs, and the amendments seem to reverse the Government's position. They provide that to such an extent as may be specified, presumably by the SIB, the designated rules or regulations may not be modified or waived in relation to a member of a recognised self-regulating profession. Interestingly, we understood from the SIB that the power of waive provisions came as a surprise to it. It was not particularly keen on them. We would like the Minister to say whether what I have described is true and that this is a significant change of position by the Government, in which case it is welcome.

Mr. Tim Smith: I received a note from the Securities Association about the amendment. It was worried that the amendment would introduce an unfortunate degree of inflexibility into the system. Will my hon. Friend the Minister confirm that this is a reserve power which will be used only in cases of abuse by SROs? That reassurance will probably meet the association's concerns.

Mr. Cousins: What proposals do the Government have for monitoring these proposals? There is now the possibility of some choice of regulatory system. The creditability of the mixed economy regulation that the Minister is proposing depends on there not being regulatory arbitrage. The proposals may go some way to undermine the clarity of the system. That may be acceptable, but does the Minister propose to put in place a monitoring of the system by the SIB, some other agency or even the Department, to ensure that abuses do not grow up from the ability to choose the regulatory mechanism under which one operates?

Mr. Redwood: I have explained the purposes behind the amendments. They reflect the debate in Committee and the response to the consultations that my officials have undertaken during the past few months. I hope that the hon. Member for Norwich, South (Mr. Garrett) welcomes it on the basis that I have described.
I must tell my hon. Friend the Member for Beaconsfield (Mr. Smith) that I spelled it out carefully, and it is on the basis which I described that it goes forward for those special circumstances which I outlined.
The hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) asked about the monitoring changes and whether there could be choice between regulators in a way which could reduce the protection to investors and other users of these financial markets. I do not think that that is possible, because all these SROs and practitioner bodies have to meet the adequacy test. That is the underlying guarantee concerning the protection offered.

Amendment agreed to.

Clause 188

STANDARD OF PROTECTION FOR INVESTORS

Mr. Tim Smith: I beg to move amendment No. 308, in page 190, line 31, at end insert
`such rules taken together with the general professional rules of the body which apply to all kinds of business undertaken


by its members must provide their clients with no less effective protection than that provided for the same purposes by the rules of self-regulating organisations under this Act.'.
The core rules are not to apply to the recognised professional bodies. We discussed this issue in Committee, where I proposed an amendment similar to, but not the same as, this one. The amendment tries to ensure that, even though the core rules are not to apply, investors who deal with members of recognised professional bodies will get no less effective protection than that afforded to those who invest through members of SROs.
In response to the amendment that I proposed in Committee, my hon. Friend the Minister's predecessor said:
There is a difficulty with amendment (a). It risks locking the recognition tests for professional bodies to their investment business rules. That is unnecessary because in some respects—for example, solicitors and clients' money—adequate protection can be achieved by relying on the general rules of the body."—[Official Report, Standing Committee D, 29 June 1989; c. 643.]
I have redrafted my amendment to take his point into account. The amendment now refers not just to the investment business rules of the recognised professional body, but to the general rules that apply to all the business that the member of an RPB undertakes. For a solicitor who is a member of the Law Society, there are client account rules which apply to all his business. Now that I have modified my amendment to take account of the objection of my hon. Friend's predecessor, I hope that it will be acceptable.

Mr Redwood: I am grateful to my hon. Friend the Member for Beaconsfield (Mr Smith) for recasting his amendment, but I am afraid that I still have problems with it. I hope to convince him that the effect that he hopes to achieve can already be achieved by the Bill.
The Government have often made it clear that it is not intended that regulation of our recognised professional bodies should or could be regarded as a soft option. That is why, in the Bill, as in the original Act, the test that self-regulating organisations and professional bodies have to satisfy is, when it comes to the protection provided to investors, identical—which is what I said in response to the previous debate. When these new provisions come into force, SROs and RPBs will have to satisfy the SIB that their rules provide an adequate level of investor protection. They will not all achieve that level of investor protection in exactly the same way.
It is one of the main strengths of a practitioner-based system that, within the overall requirement of providing adequate protection for investors—which is what the debate is about—it is for the regulator concerned to devise the best way of regulating its members. There is no compromise on the level of investor protection. In every case, the SIB will have to be satisfied that it is adequate. My hon. Friend's amendment could turn out to be not only unnecessary, but harmful.

Mr. Tim Smith: Is there a parity between all RPBs and the SROs in terms of admission to the body concerned and, therefore, competence to give investment advice? That was a point raised in Committee.

Mr. Redwood: As I have just explained, the bottom line is what kind of protection is offered to investors. The adequacy test is the same for both categories. There are different routes to achieve that.
The amendment could be difficult. My hon. Friend will recall that one reason why we are amending the recognition test for the SROs and RPBs is that the original equivalence test was widely interpreted as requiring a close textual comparison of different sets of rules, rather than a comparison of their effects and we should be interested in the effects, I fear that, by reintroducing a formal comparison between the rules of an SRO and the rules of an RPB, the amendment would lead to a similar approach being adopted in the future. I urge the House to reject the amendment.

Mr. Tim Smith: I am disappointed, and it is noticeable that the Government have changed their ground. I sought to cater for the objection put up to my original amendment, yet we now have a completely different objection, which was not even mentioned in Committee. As three months have passed since that debate, I thought that I would ask a few of the RPBs whether they would mind if the core rules were applied to them. The other day, I went to the Insurance Brokers Registration Council, about which I was fairly critical in Committee. The council members are clearly not the people who are responsible for this failure of the core rules to apply to the RPBs. The council, which is an RPB, told me that it would be happy for the core rules to apply to its members. Will my hon. Friend the Minister tell me who objects?

Amendment negatived.

Clause 191

CONSEQUENTIAL AMENDMENTS AND DELEGATION OF FUNCTIONS ON COMMENCEMENT

Mr. Redwood: I beg to move Government amendment No. 253, in page 193, line 16, leave out subsection (4) and insert—
'(4) References in the Financial Services Act 1986 to a delegation order made under section 114 of that Act or to a transfer order made under paragraph 28 of Schedule 11 to that Act include an order made containing any such provision as is authorised by subsection (2) or (3).'.
The amendment makes a technical change, ensuring that the consequences of the delegation to the SIB of the new powers introduced by the Bill may be dealt with in the same way as under the Financial Services Act 1986. I commend it to the House.

Amendment agreed to.

Schedule 21

CONSEQUENTIAL AMENDMENTS OF THE FINANCIAL SERVICES ACT 1986

Mr. Redwood: I beg to move amendment No. 307, in page 298, line 6, leave out paragraph 28 and insert—

'28.—(1) Paragraph 4 (requirements for recognition of self-regulating organisation for friendly societies) is amended as follows.

(2) In sub-paragraph (4)—

(a) in paragraph (a) for "22" substitute "22C", and
(b) omit paragraph (b).

(3) In sub-paragraph (5) for "22" substitute "22C".'.

This is another purely technical amendment which amends an erroneous cross-reference in the schedule.

Amendment agreed to.

Amendments made: No. 254, in page 300, line 43, after '22' insert
'(and after the paragraph inserted by section 178(3))'.

No. 255, in page 301, line 7, at end insert—
'(3A) It may be provided that, to such extent as may be specified, the designated rules or regulations may not be modified or waived (under paragraph 22B below or section 50) in relation to a member society.
Where such provision is made any modification or waiver previouly granted shall cease to have effect, subject to any transitional provision or saving contained in the rules or regulations.'.—[Mr. Redwood.]

New Clause 43

PROVISIONS EXTENDING TO NORTHERN IRELAND

'.—(1) The provisions of this Act extend to Northern Ireland so far as they amend, or provide for the amendment of, an enactment which so extends.

(2) So far as any provision of this Act amends the Companies Act 1985 or the Insolvency Act 1986, its application to companies registered or incorporated in Northern Ireland is subject to section 745(1) of the Companies Act 1985 or section 441(2) of the Insolvency Act 1986, as the case may be.

(3) In Part III (investigations and powers to obtain information), sections 78 to 87 (powers exercisable to assist overseas regulatory authorities) extend to Northern Ireland.

(4) Part VI (mergers and related matters) extends to Northern Ireland.

(5) In Part VII (financial markets and insolvency) the following provisions extend to Northern Ireland—

(a) sections 144 and 145 (introductory provisions and definition of "market contract"),
(b) section 146 and Schedule 20 (additional requirements for recognition of investment exchange or clearing house),
(c) sections 147, 150, 152, (Powers of Secretary of State to give directions), (Application to determine whether default proceedings to be taken),157 and 158 (provisions relating to recognised investment exchanges and clearing houses),
(d) sections 159, (Certain money market institutions) and (Settlement arrangements provided by the Bank of England) (power to extend provisions to other financial markets),
(e) section 171 (indemnity for certain acts), and
(f) sections (Power to make further provision by regulations),172, (Construction of references to parties to market contracts) and 173 to 176 (supplementary provisions).

(6) Part VIII (amendments of the Financial Services Act 1986) extends to Northern Ireland.

Part IX (transfer of securities) extends to Northern Ireland.
Subject to any Order made after the passing of this Act by virtue of section 3(1)(a) of the Northern Ireland Constitution Act 1973, the transfer of securities shall not be a transferred matter for the purposes of that Act but shall for the purposes of section 3(2) be treated as specified in Schedule 3 to that Act".

(8) In Part X (miscellaneous and general provisions), this section, section (Making of corresponding provision for Northern Ireland), 201 and 202 (general provisions) extend to Northern Ireland.

(9) Except as mentioned above, the provisions of this Act do not extend to Northern Ireland.'.—[Mr. Redwood.]

Brought up, and read the First time.

Mr. Redwood: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Sir Paul Dean:): With this, it will be convenient to take Government new clause 44—Making of corresponding provision for Northern Ireland—and Government amendment No. 259.

Mr. Redwood: The new clauses are to be inserted in place of the present clause 200, which is removed by amendment No. 259. The new clauses merely set out the arrangements for Northern Ireland. On the face of it, it seems curious that some provisions extend to the Province, whereas others, even in the same part, do not. It may be appropriate for me to take a few moments to explain how that has occurred. Traditionally, and constitutionally, it has been practice for the Northern Ireland authority to cary out most of the executive functions of Government, including in particular most company law functions.
Under the developed powers of the Northern Ireland Act 1974 provisions may be enacted by an Order in Council and this procedure is intended for provisions in the Bill affecting company law and insolvency law. However, some enactments amended in the Bill, notably the Financial Services Act 1986 and the Fair Trading Act 1973, were, in the main, introduced to apply on a United Kingdom basis. We therefore had to follow suit with amendments to those acts.
Inevitably there have been some new provisions in the Bill which do not follow any precedent-part IX on transfer of securities is such an example. In those cases we have taken the advice of the Northern Ireland authorities in deciding which procedure to follow.
I hope that that explains the pattern. The amendments being made simply reflects changes made in the Bill and I hope, set out the provisions a little more clearly than before.

Question put and agreed.

Clause read a Second time, and added to the Bill.

New Clause 44

MAKING OF CORRESPONDING PROVISION FOR NORTHERN IRELAND

'.—(1) An Order in Council under paragraph 1(1)(b) of Schedule 1 to the Northern Ireland Act 1974 (legislation for Northern Ireland in the interim period) which contains a statement that it 'is only made for purposes corresponding to the purposes of provisions of this Act to which this section applies—

(a) shall not be subject to paragraph 1(4) and (5) of that Schedule (affirmative resolution of both Houses of Parliament), but
(b) shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(2) The provisions of this Act to which this section applies are—

(a) Parts I to V, and
(b) Part VII, except sections 146, 147 and 158 and Schedule 20.'.—[Mr. Redwood.]

Brought up, read the First and Second time, and added to the Bill.

Mr. Redwood: I beg to move amendment No. 256, in page 195, line 4, leave out clause 193.

Mr. Deputy Speaker: With this it will be convenient to discuss Government amendment No. 282.

Mr. Redwood: Some doubt has been expressed as whether debts that were not due and payable at the commencement of a bankruptcy could be incorporated in a set off under section 323 of the Insolvency Act 1986. A set-off is a device by which a creditor can add up all his credits and debits with an insolvent person and claim the net figure.
The doubt particularly concerns contingent creditors such as guarantors of the bankrupt's debt since the


guarantor is often called upon after the commencement of the bankruptcy. The present clause seeks to deal with that perceived doubt by omitting the word "due". It has also been simplified in its construction. The clause may well have clarified the position of some contingent claims, but only by potentially widening the scope of those claims capable of being included in the set off. The extent of that widening could be considerable. It is desirable as far as possible to maintain the principle of pari passu or fair distribution in insolvency.
To avoid creating fresh uncertainty we have decided that it would be preferable to delete the clause from the Bill. In taking that decision we have borne in mind that the current law has not been fully tested in the courts. In all the circumstances it is sensible and desirable to delete the clause and allow the existing law to develop. British law thrives on cases and individual decisions—

Mr. Derek Foster: And lawyers.

Mr. Redwood: Yes, and lawyers, and it should be allowed to do so here.
Amendment No. 282 is consequential on the deletion of clause 193 and removes the Insolvency Act 1986 from the title of the Bill.

Question put and agreed to.

Clause 197

BUILDING SOCIETIES: MISCELLANEOUS AMENDMENTS

Amendments made: No. 257, in page 196, line 22, after '(1)' insert
'In section 104 of the Building Societies Act 1986 (power to assimilate law relating to building societies and law relating to companies), in subsection (2) (relevant provisions of that Act), omit the word "and" before paragraph (d) and after that paragraph add—
; and
(e) section 110 (provisions exempting officers and auditors from liability).
(2)'.

No. 258, in page 197, line 1, leave out clause 198.

No. 259, in page 197, line 26, leave out clause 200.—[Mr. Redwood.]

Clause 201

COMMENCEMENT AND TRANSITIONAL PROVISIONS

Mr. Redwood: I beg to move amendment No. 260, in page 198, line 27, after 'The' insert
'following provisions of this Act come into force on Royal Assent—

(a) in Part VI (mergers)—

(i) sections 137 to 140, and
(ii) paragraphs 2 to 11, 13 to 15, 17 to 19 and 21 to 24 of Schedule 19, and section 143 so far as relating to those paragraphs;

(b) in Part VIII (amendments of the Financial Services Act 1986), section 187 (offers of short-dated debentures);
(c) in Part X (miscellaneous and general provisions), the repeals made by Schedule 22 in sections 71, 74, 88 and 89 of, and Schedule 9 to, the Fair Trading Act 1973, and section 199 so far as relating to those repeals.

(1A) The other'.

Mr. Deputy Speaker: With this it will be convenient to discuss the following. Amendment (a) to the proposed amendment, before (a), insert—

'(a) in Part IV (amendments of company law), section 131 (application to declare dissolution of company void);'.
Government amendment No. 261.

Mr. Redwood: My amendment proposes that certain provisions of the Bill should be brought into effect upon Royal Assent. The first set compromises certain of the provisions on mergers in part VI of the Bill, the most important of which concern the new powers to accept undertakings to divest instead of making a reference, the temporary restrictions on share dealings once a reference has been made and the improved powers for looking at creeping acquisitions. We consider that those provisions will be of sufficient immediate use to warrant early introduction and will not, on the other hand, impinge unfairly on business.
The other provision covered is clause 187. That amends section 195 of the Financial Services Act 1986, which increases from one year to five the maximum maturity which certain debentures may have if they are to be offered without a prospectus.
The change is one of a number of measures announced in the Chancellor's Budget to unify the short-term corporate bond and sterling commercial paper markets.

Mr. John Garrett: Which Chancellor?

Mr. Redwood: They are all Chancellors of the same Government. The other changes have already been implemented and this one should be made as soon as possible so as to complete the process. The other provisions of the Bill remain as at present and Government orders will be made. The Government intend to bring as many provisions as possible into force within the first six months or so of the new year. Amendment No. 261 is consequential.

Amendment to the proposed amendment agreed to.

Main amendment, as amended, agreed to.

Amendment made: No. 261, in page 198, line 33, at end insert—
'(3) The Secretary of State may also by order under this section amend any enactment which refers to the commencement of a provision brought into force by the order so as to substitute a reference to the actual date on which it comes into force.'.—[Mr. Redwood.]

Schedule 22

REPEALS

Mr. Redwood: I beg to move amendment No. 262, in page 303, line 10, at end insert—


'1964 c. 40
Harbours Act 1964.
In section 42(6), the words "required to be attached to a company's balance sheet".'.

Mr. Deputy Speaker: With this it will be convenient to discuss Government amendments Nos. 263 to 281.

Mr. Redwood: This group of amendments make changes to schedule 22, which list the repeals made in the Bill to various amendments in consequence of its provisions. The amendments are either in consequence of changes discussed earlier or have been left over from earlier——

It being One o'clock, Mr. DEPUTY SPEAKER proceeded, pursuant to the Order [26 October], to put the Question on the remaining amendments standing in the name of a member of the Government.

Amendment agreed to.

Mr. DEPUTY SPEAKER then proceeded to put forthwith the Question on amendments, moved by a Member of the Government, of which notice had been given, to that part of the Bill to be concluded at One o'clock am.

Amendments made: No. 263, in page 303, line 34, leave out from beginning to end of line 37.

No. 264, page 303, line 38, column 3, leave out from beginning to end of line 40.

No. 309, in page 303, line 40, column 3, at end insert 'Section 160(3).'.

No. 265, in page 304, line 29, column 3, at end insert 'Section 440.'.

No. 266, in page 304, line 36, column 3, leave out from beginning to end of line 38 and insert 'Section 447(1).'.

No. 267, in page 304, line 50, column 3, at end insert—



'(a) in subsection (2), paragraphs (a) and (d) and the word "or" preceding the latter.'.

No. 268, page 305, line 24, column 23, at end insert—



'(aa) in paragraph 1(1), the words "paragraph 60(2) of Schedule 4 or paragraph 19(3) of Schedule 9";'.

No. 269, in page 305, line 29, column 3, leave out `3(2)' and insert '3(1)'.

No. 270, in page 305, line 34, column 3, at end insert—



'(ee) in paragraph 4(1), the words "(whether as personal representative or otherwise)";'.

No. 271, in page 306, line 7, column 3, at end insert—



'In Schedule 22—



(a) the entry relating to section 36(4);



(b) in the entry relating to sections 363 to 365, the words "(with Schedule 15)";



(c) in the entry relating to sections 384 to 393, in column 2. the word "qualifications".'.

No. 272, in page 306, line 13, column 3, leave out '393 and 703(1)' and insert 'and 393'.

No. 273, in page 306, line 15, leave out from beginning to end of line 17.

No. 274, in page 306, line 18, column 3, leave out `paragraph' and insert 'paragraphs 7(3), 23 and'.

No. 275, in page 306, line 26, after 'sections' insert '45(5)'.

No. 276, in page 306, line 27, column 3, at end insert—




'In Part I of Schedule 13, the entries relating to sections 222(4), 225 and 733(3),'.

No. 277, in page 307, line 41, column 3, at beginning insert—



'In the Table in section 84(1), the entry relating to persons appointed under section 94, 106 or 177 of the Financial Services Act 1986.'.

No. 278, in page 307, line 43, column 3, leave out '18(2)' and insert '18(1)'.

No. 279, in page 307, line 44, column 3, leave out from beginning to 'and' and insert—



'(b) in paragraph 18(7), the words "and (1A)";



(c) paragraph 18(8)'.

No. 280, in page 307, line 48, at end insert—


'1988 c. 1.
Income and Corporation Taxes Act 1988.
Section 565(6)(b).'.

No. 281, in page 307, line 49, at end insert—


'1988 c. 48.
Copyright, Designs and Patents Act 1988,
In Schedule 7, paragraph 31.'.—[Mr. Redwood.]

Title

Amendment made: No. 282, in line 17, leave out 'the Insolvency Act 1986.'.

Queen's and Prince of Wales's consent having been signified:—

It being after One o'clock am, MR. DEPUTY SPEAKER proceeded, pursuant to the Order this day, to put forthwith the Question, That the Bill be now read the Third time:—

The House divided: Ayes 110, Noes 20.

Division No. 359]
[1.00 am


AYES


Alexander, Richard
Dover, Den


Amess, David
Dunn, Bob


Amos, Alan
Durant, Tony


Arbuthnot, James
Fallon, Michael


Arnold, Jacques (Gravesham)
Favell, Tony


Atkinson, David
Fenner, Dame Peggy


Baker, Nicholas (Dorset N)
Forsyth, Michael (Stirling)


Bennett, Nicholas (Pembroke)
Forth, Eric


Bowden, A (Brighton K'pto'n)
Fox, Sir Marcus


Bowis, John
Freeman, Roger


Brazier, Julian
French, Douglas


Brooke, Rt Hon Peter
Garel-Jones, Tristan


Brown, Michael (Brigg &amp; Cl't's)
Gill, Christopher


Browne, John (Winchester)
Glyn, Dr Alan


Burns, Simon
Goodlad, Alastair


Burt, Alistair
Goodson-Wickes, Dr Charles


Butterfill, John
Greenway, John (Ryedale)


Carlile, Alex (Mont'g)
Gregory, Conal


Carlisle, John, (Luton N)
Griffiths, Peter (Portsmouth N)


Carlisle, Kenneth (Lincoln)
Hague, William


Carrington, Matthew
Hamilton, Hon Archie (Epsom)


Carttiss, Michael
Hamilton, Neil (Tatton)


Cash, William
Hanley, Jeremy


Chope, Christopher
Harris, David


Clark, Dr Michael (Rochford)
Hayward, Robert


Clarke, Rt Hon K. (Rushcliffe)
Heathcoat-Amory, David


Coombs, Anthony (Wyre F'rest)
Howarth, G. (Cannock &amp; B'wd)


Cran, James
Hughes, Robert G. (Harrow W)


Davis, David (Boothferry)
Hunt, Sir John (Ravensbourne)


Day, Stephen
Hunter, Andrew






Irvine, Michael
Powell, William (Corby)


Jack, Michael
Redwood, John


Janman, Tim
Ridley, Rt Hon Nicholas


Johnson Smith, Sir Geoffrey
Sackville, Hon Tom


Kirkhope, Timothy
Smith, Tim (Beaconsfield)


Knapman, Roger
Soames, Hon Nicholas


Knight, Greg (Derby North)
Stern, Michael


Knowles, Michael
Taylor, John M (Solihull)


Lord, Michael
Taylor, Teddy (S'end E)


Maclean, David
Thompson, D. (Calder Valley)


Malins, Humfrey
Thurnham, Peter


Mans, Keith
Townsend, Cyril D. (B'heath)


Martin, David (Portsmouth S)
Twinn, Dr Ian


Maxwell-Hyslop, Robin
Waddington, Rt Hon David


Meyer, Sir Anthony
Walden, George


Mills, Iain
Waller, Gary


Mitchell, Sir David
Ward, John


Morris, M (N'hampton S)
Wardle, Charles (Bexhill)


Moss, Malcolm
Warren, Kenneth


Nelson, Anthony
Watts, John


Neubert, Michael
Wheeler, John


Norris, Steve
Widdecombe, Ann


Paice, James
Wood, Timothy


Patnick, Irvine



Pattie. Rt Hon Sir Geoffrey
Tellers for the Ayes:


Peacock, Mrs Elizabeth
Mr. Sidney Chapman and


Porter, David (Waveney)
Mr. Stephen Dorrell.




NOES


Barnes, Harry (Derbyshire NE)
Meale, Alan


Battle, John
Michie, Bill (Sheffield Heeley)


Bennett, A. F. (D'nt'n &amp; R'dish)
Powell, Ray (Ogmore)


Clay, Bob
Quin, Ms Joyce


Cousins, Jim
Ross, Ernie (Dundee W)


Cryer, Bob
Skinner, Dennis


Dixon, Don
Vaz, Keith


Fields, Terry (L'pool B G'n)
Welsh, Michael (Doncaster N)


Foster, Derek



Garrett, John (Norwich South)
Tellers for the Noes:


Hughes, John (Coventry NE)
Mr. Frank Haynes and


Jones, Martyn (Clwyd S W)
Mr. Robert Wareing.

Question accordingly agreed to.

Bill read the Third time, and passed, with amendments.

Orders of the Day — Mr. Ronald Cannon

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Sackville]

Sir Nicholas Bonsor: rose——

Hon. Members: Hear, hear.

Sir Nicholas Bonsor: That was a very nice welcome from my colleagues, and I thank them.
I am grateful for this opportunity to raise the case of Mr. Ronald Cannon, a constituent of mine who is currently serving a prison sentence of four years at Swaleside prison, Kent. Mr. Cannon is a reformed heroin addict, and like most people who have had that unfortunate experience he found it difficult to break free from the circumstances of his addiction and those who surrounded him. As a result, in October 1988 he was sentenced to prison for conspiring to supply controlled drugs.
On the face of it, that would not appear to be anything other than a straightforward case, with which I would not have bothered this House. However, three facts surround the circumstances in which Mr. Cannon is being held in prison. They should be brought to the attention of the House, and they are the subject of the debate.
There are three reasons for my concern. First, through incompetent administration by those responsible for keeping Mr. Cannon's records, he has been deprived of the opportunity that he should have been given to seek a second review of his suitability for parole. Because of that, he has been deprived of the chance of obtaining his freedom and is now languishing in jail. I am not concerned with the merits of whether that parole should be granted, only with the circumstances by which he has been denied the opportunity to put his case.
Secondly, it has been brought to my attention, from two separate sources—Mr. Cannon and his prison visitor that—my intervention in an attempt to expedite his case has in fact had the reverse effect. The House will no doubt agree with me that should that prove to be the case, it would be extremely serious; no Member of Parliament could properly represent his constituents if he thought that the result of his doing so would be to prejudice that constituent's circumstances.
Thirdly, during my investigations into what has happened to Mr. Cannon, I discovered that his case is representative of a great many of those who are seeking parole and that the whole system of parole has broken down. I shall ask the Minister to do the root and branch reform of the system of parole and remission suggested in 1988 by my noble Friend Lord Carlisle of Bucklow and his review committee on the parole system in England and Wales.
I shall deal first with the matter of Mr. Cannon's freedom, because that is probably the most important of the three points that I shall deal with. I can do no better in an effort to explain the circumstances than to read the letter which I received from Mr. Jennings, the prison visitor to whom I referred. Mr. Jennings wrote to me in a letter of 4 October in respect of my constituent. The letter states:
I write as a member of the Board of Visitors at Swaleside Prison in Kent, a member of the Parole Review Committee and a Magistrate.


Over many months, I have been trying to assist Mr. Cannon in connection with his second parole review.
Unfortunately, when he was sentenced no-one noticed that he had already served 15/16 months on Remand in Custody. As a result, all his dates were wrongly calculated, and entered in his records—it took many months for this to be put right, and by this time he was already overdue for his first Parole Review. This was eventually completed, and not surprisingly, he was unsuccessful—The committee no doubt thinking that he would have another opportunity at his second review.
My involvement in this arose when I wrote to the predecessor of my hon. Friend the Minister on 7 June and asked him to look into the circumstances whereby Mr. Cannon had been kept waiting for the result of the Parole Board sitting that had occurred in February. Mr. Cannon had been waiting for about four months and I therefore wrote to the Minister asking when he would be given the result of the Parole Board decision. He received it four days later, but I did not know that because I received no reply to my letter until the end of August, by which time I had written a second letter to the Minister.
In the considerable correspondence that I have had with my hon. Friend the Under-Secretary of State and his predecessor, no one mentioned to me that Mr. Cannon's period on remand in custody had not been taken into account when dealing with the date of his parole review. It is dreadful that he has not been granted a second parole review. The reason for that is set out in the latest letter which I received from my hon. Friend the Minister:
Mr. Cannon does not qualify for another parole review as, under Rule 6(6) of the Local Review Committee Rules 1967, a prisoner is not eligible for a further statutory parole review unless there is a period of 16 months or more between the previous review and the earliest date of release. In Mr. Cannon's case this period amounts to less than 14 months; he must therefore I am afraid, serve to his earliest date of release which is currently 2 April 1990.
That does not take into account the fact that the date of Mr. Cannon's first parole review was wrong, and was heard too late. Therefore, he should have had the opportunity of two parole reviews. That is why I say that he has been deprived of the opportunity to argue again for freedom earlier than he can now expect.
The second question that I wish to raise is whether my intervention has helped or hindered Mr. Cannon's case. My attention was drawn to the danger that he might have been prejudiced by my intervention by a letter that he wrote to me at the end of August. The letter states:
Today I have seen one of the prison governors to get them to expedite my answer.
By that he meant the answer to a petition that he had sent to the Home Office immediately upon receiving the refusal of his first parole review in June. The letter continues:
I have just been told that because I wrote to you voicing my disappointment with the parole decision my petition was withdrawn and not even looked at. But today it has gone back into the pending tray. Four months I have been waiting for an answer.
As a result of that letter, I wrote on 7 September to my hon. Friend the Under-Secretary of State:
I am concerned that the fact that Mr. Cannon wrote to me may have jeopardized his position, and I find it hard to see why someone who is a 'prison trusty', allowed out on home leave, should be found unsuitable for parole.
I would much appreciate it if you would satisfy yourself that my intervention has not had an adverse effect on Mr. Cannon's position.
I did not receive an answer to that letter until 17 October and in that letter, my hon. Friend says:

Finally, I should add that a reply to Mr. Cannon's petition was forwarded to the prison on 12 September and reassure you that your intervention in Mr. Cannon's cases did not adversely affect consideration of it.
Unfortunately, I cannot entirely accept that answer as being accurate, because in the letter that I received from Mr. Jennings, and that I was quoting earlier, Mr. Jennings also has something to say about the circumstances in which Mr. Cannon was prejudiced by my intervention.
He continues in his letter of 4 October as follows:
He has tried every avenue open to him without success and the last time I telephoned London"—
by London he meant the Parole Board in London, as I confirmed on the telephone to him—
about his case I was told … 'Unfortunately, Cannon has involved a Member of Parliament and this will cause further delay."'
I cannot accept that my intervention on 7 June should still be causing further delay by the time that Mr. Jennings was talking to the parole board in London. I cannot accept that my intervention, in any circumstances, considering that it was by making a specific request that review of the case be expedited, should have caused delay in reviewing his case.
I wish my hon. Friend to investigate who made that comment to Mr. Jennings. Unfortunately, he was not able to say who had said it to him. Secondly, will he find the person who told Mr. Cannon that my intervention had caused his petition to be put aside. Thirdly, are these facts accurate? Fourthly, will he take whatever necessary action is due to be taken, either in regard to why that information was wrongly given to Mr. Cannon and Mr. Jennings, or why that delay took place? The latter would be a much more serious event than if the former had proved to have been made inaccurately, by an employee in the Home Office or in the Parole Board offices.
My last point concerns parole generally. Having made some inquiries as a result of being alarmed by the way in which Mr. Cannon had been treated, I discovered that the parole system is largely breaking down. Mr. Jennings told me that he has at least 10 cases a week about which he is deeply concerned and in which parole is failing to come up accurately or in time. He told me that in some instances, he even has cases where the parole review decision is not announced until the prisoner concerned has already been released on remission, and sometimes months later.
My hon. Friend is aware of what Lord Carlisle proposes in his review. In paragraph 299, Lord Carlisle recommends a root-and-branch reform of the parole and remission systems. I warmly endorse the proposals made in that report, and urge my hon. Friend to implement them as soon as possible. The parole system is ineffective. It is dealing with 26,000 cases a year, when it was set up and structured to deal with only 4,000 or 5,000. The projections are that, if trends continue, by the early 1990s, it will deal with 33,000. Such an escalation of the number of people being investigated for parole would make this system inoperable, and unless the Government take action, we shall shortly have a chaotic and appalling situation.
I ask my hon. Friend to do that, and to see to it that Mr. Cannon, notwithstanding the general rule, gets a further opportunity to apply for parole, because as I understand it, and as Mr. Jennings has been told, that second review should be granted if his first review had been properly


carried out in terms of his early imprisonment on remand awaiting trial. Will he also undertake the investigations that I have asked for?

The Parliamentary Under-Secretary of State for the Home Department (Mr. Peter Lloyd): I am grateful to my hon. Friend the Member for Upminster (Sir N. Bonsor) for raising the case of Mr. Cannon and providing me with an opportunity to address the House on the important subjects of parole and Mr. Cannon's particular circumstances. My hon. Friend has raised especially Mr. Jennings's letter this evening, and it is the first time that I have heard of it. According I shall not comment on its contents, which I have not seen. However, my hon. Friend has asked me to investigate its contents, and I shall do so. I shall take extremely seriously anything written to a colleague or to myself from a member of a board of prison visitors. I have no reason to believe that my hon. Friend's intervention, as I stated when I wrote to him, had any effect on the outcome of the parole consideration, nor on the dates.
Perhaps it would be useful if I gave some background both to the parole system, as my hon. Friend made a number of remarks on the way that it is working now, and on Mr. Cannon's case. All prisoners serving determinate sentences of more than a year are eligible for parole. Their parole eligibility date marks the earliest date on which they can be released on licence if the parole board so recommends. It is important to remember that no one may be released early on licence without a positive rcommendation either from the local review committee acting on behalf of the Parole Board, or from the Parole Board itself. A prisoner becomes eligible for parole either when he has served one third of his sentence—taking into account any time spent on remand—or six months after the sentence has been passed, whichever is later. That is, I think, an essential part of the misunderstanding which clearly exists in this case.
Mr. Cannon was remanded by Havering magistrates court on 5 August 1987; committed by it on 10 November 1987; and tried at the Central Criminial court and sentenced on 26 October 1988 to four years' imprisonment for conspiracy to supply class A controlled drugs. Mr. Cannon's parole eligibility date was calculated to be 26 April 1989. As hon. Members will readily calculate, this means that in Mr. Cannon's case, his PED was six months after the start of his sentence, rather than one third the way through.
All cases are considered first by the local review committee or LRC as it is commonly called, at the prison where the inmate is held. The timing of the LRC meeting depends on the length of the sentence. Generally, for sentences of up to two years, the LRC will consider the case about eight weeks before PED. For longer sentence cases—and Mr. Cannon's case falls in this class—the review is generally held three and a half to four months before that date.
There are two objectives to these timing arrangements. First, to maximise the time available for observation and reporting in the establishment before the parole review. Perhaps I could remind my hon. Friend that parole review is definitely not re-sentencing. The parole selection procedure is based not merely on the evidence and reports available to the judge at the time of sentencing. In

addition, a large number of reports on the prisoner drawn from a number of sources are prepared—from prison officers in various parts of the prison who may come into contact with the prisoner in his daily life; prison governing staff; prison medical staff; chaplains; prison probation staff; and importantly, a home circumstance report prepared by a probation officer from the probation service which would offer supervision in the event of early release on licence. These reports take some time to prepare and it is only fair that they are based on a reasonable period of observation. It is for this reason that we allow six months as a very minimum time in which to prepare and consider the reports.
The second objective is to allow sufficient time for the rest of the selection procedure to be followed and for the establishment to be notified of the parole decision in sufficient time for the inmate to be released on the parole eligibility date, or its anniversary, if parole is granted. In Mr. Cannon's case, the LRC at Wandsworth considered the reports on 9 February 1989, just over 11 weeks before his PED.
Mr. Cannon's offence did not fall in those categories of cases which can be decided on the advice of the local review committee alone. It was therefore referred to the Parole Board for a further review. Mr. Cannon's case was considered by the board on 2 June 1989. As my hon. Friend will know, the Parole Board did not find Mr. Cannon suitable for early release on licence; and accordingly the Home Secretary had no power to grant parole. Notification of this decision was sent to Swaleside prison where Mr. Cannon was then located on 12 June; and he was informed accordingly.
Naturally, Mr. Cannon was disappointed with the outcome of this parole review. He has drawn to my hon. Friend's attention the fact that he is a "prison trusty" allowed out on home leave and yet denied parole. Hon. Members will be aware that although an inmate's behaviour in prison is one of the factors considered by the Parole Board, other aspects are also reviewed. The Parole Board regularly publishes its criteria for parole selection in its annual report. It considers each case carefully under six headings. The first is the nature of the offence. The Parole Board has due regard to the public's concern about early release of inmates already convicted of offences of violence or those which jeopardise public safety. Although each case is considered individually, cases involving trafficking in drugs such as heroin are bound to cause concern.
The second heading relates to an inmate's criminal and other history. The incidence and frequency of previous offending, having regard to the nature of offences, is used as a guide to the probability of reoffending. Obviously, many previous convictions indicate, in the absence of other factors, a high probability of reoffending. Other indicators of this are persistent offending since an early age, short intervals at liberty between convictions and a record of employment which is poor in terms of the quality of the jobs and the lengths of continuous employment. If an inmate has previously been under the supervision of the probation service, his response to that may be relevant to his likely response to parole supervision. I have no doubt that the Parole Board will have reviewed Mr. Cannon particularly carefully under this heading.
The third category is prison behaviour and response to treatment. As I have said, the main bulk of the dossier will consist of reports by various prison officials who know the prisoner well. These reports build up a picture of what the


prisoner has done and in what light he has shown himself since his conviction. In general, bad conduct in prison is a factor against parole and good conduct a favourable factor. But many recidivists are well experienced at playing the system, so prison behaviour—which may have little bearing on behaviour outside the prison walls—has to be regarded in light of other factors.
The fourth heading is medical considerations. In this case, where Mr. Cannon's offence involved drugs, medical reports will be of crucial importance as regards the chances of the prisoner reoffending and the possible gravity of further offences.
Fifthly, the inmate's home circumstances and employment prospects on release are considered. Home circumstances and employment prospects can be critical for success on parole. A good home, a job to go to and the absence of the circumstances and temptations which led to the earlier crime are factors favourable to parole.
The sixth and final heading is co-operation with parole supervision. The supervision of a parolee by a probation officer during the parole period is an essential part of the parole scheme. It is always difficult to be sure about this. However, a previous failure on parole or a failure on probation may make co-operation doubtful.
Each case is carefully considered against these criteria. For this reason there is no mileage in comparing Mr. Cannon's case with those of any co-defendants. The Parole Board will consider each individual's circumstances. Mr. Cannon has drawn my hon. Friend's attention to his good prisoner behaviour. I am sure that the Parole Board will have taken that into account. It will also have taken into account his criminal record—and I should have liked to have given the House an account of that——

Sir Nicholas Bonsor: I accept what my hon. Friend is saying but as I said at the outset, I am not arguing that he should have been given parole at that review. The point that I was making—and the point that Mr. Jennings made strongly to me in the letter from which I quoted—was that one reason why the parole review board might have turned down his original application was on the understanding that he could have another. I should be grateful if my hon. Friend would address that point.

Mr. Lloyd: I have partly addressed that point and will return to it. As this is part of a continuing exchange, it is worth making it clear that the Parole Board makes its own decisions, which the Home Secretary and myself can in no way alter. If the circumstances of which my hon. Friend's constituent has complained are such that he is surprised at the result, that must be part of my reply.
It is an important part of my reply to show that on the information that is available to me the result is not at all surprising. However, I accept what my hon. Friend says and I hope that he will accept that there is nothing about the background of the case that makes the Parole Board's decision in the least bit surprising.
I am satisfied that Mr. Cannon's case was considered thoroughly and carefully by the Parole Board, and, alas, he must serve until his earliest date of release, which at present is 2 April 1990, as my hon. Friend said.
But although Mr. Cannon is serving a four-year sentence, during which he might normally have expected a second review, he does not qualify for a further review.

The local review committee rules provide that an inmate is not eligible for a further statutory parole review unless there is a period of 16 months or more between the previous local review committee review and the earliest date of release.
In Mr. Cannon's case, owing to the time that he spent on remand from 10 November 1987 to 25 October 1988, he was required to serve the full six months minimum qualifying period before his parole eligibility date. That was the point that I made at the beginning of my remarks and where the root of the misunderstanding probably lies.
The local review committee review may take place only up to four months earlier than that date. For Mr. Cannon, that meant that the very first date on which his case might have been eligible for local review committee consideration would have been 26 December 1988. Even at this relatively late hour, those hon. Members who are present will readily be able to appreciate that Boxing day 1988 was less than 16 months before the earliest date of release of 2 April 1990. I recognise that it falls short by a mere three weeks, but I am sure that my hon. Friend will appreciate that the line must be drawn somewhere. Mr. Cannon's local review committee review actually took place on 9 February, just under 14 months before his earliest date of release. But if it had happened at the earliest point that it could have done, he would still not have been eligible for a second one.
I am aware that fine footwork is involved in the timing of parole reviews, and decisions about the eligibility of second and subsequent reviews are not an easy matter to understand, particularly at this time of night. I appreciate how difficult it must be for Mr. Cannon and his family and my hon. Friend to accept the Parole Board's decision and to know that because of the time that he spent on remand he is not eligible for a further review.
I am also sorry that it should have take so long to complete the first review. Here I come to one of my hon. Friend's major points. The delays that have plagued the parole system are a sad reflection on the increasing number of cases and, until recently, the inability of the Home Office parole unit to keep pace. But I reject my hon. Friend's suggestion that the system is breaking down. It is plagued by heavy delays, but within those delays it works effectively. Parole delays cause unnecessary anxiety to inmates and their families and lead to problems for the staff in the prisons. They are unacceptable and we have taken some firm steps to eliminate them. We have reorganised the parole unit, streamlined procedures and authorised and recruited additional staff. The Home Secretary has appointed additional members to the Parole Board and the board is considering additional cases at each panel sitting. We took those measures several months ago, but already they are beginning to bear fruit.
We are now seeing the first signs of real improvement and there are no longer any significant delays on cases that do not go the Parole Board but stay with the local review committees, but there are still some delays with the Parole Board. I am sure that the worst of the delays are now being eliminated and we are considering what further changes and reforms are needed to reduce those delays still further and then eliminate them altogether. I am sure that that will be achieved, if not this year, certainly during the first half of next year. That is our intention.
I am grateful to my hon. Friend for raising this difficult case. I shall look at the letter from Mr. Jennings, to which he referred, and follow it back to its source. But on the


timing of the review and on the decision that there is no opportunity under the rules for a second review, the letters that I and my predecessor have sent to my hon. Friend are correct. But I realise that the situation is complex.

Question put and agreed to.

Adjourned accordingly at twenty-one minutes to Two o'clock.